Profit Margin Calculator
Margin Is a Percentage, Not a Feeling
Two businesses can post identical dollar profits and still be in completely different financial health — one running at a comfortable 40% margin, the other scraping by at 4%. Profit margin translates raw profit into a percentage of revenue, which is what actually lets you compare a lemonade stand against a software company, or this quarter against last quarter. This calculator solves the margin equation in three directions: find the margin itself, or work backward to the revenue or cost needed to hit a target margin.
The Formula
Three related calculations, depending on which value you're solving for:
Margin = (Profit / Revenue) × 100
Required Revenue = Cost / (1 − Margin / 100)
Maximum Cost = Revenue × (1 − Margin / 100)
Where This Gets Used
- Pricing new products — work backward from a target margin to find the maximum cost you can afford to source at.
- Quoting a project — calculate the revenue you need to charge on a fixed-cost job to hit your margin target.
- Comparing product lines — a product with lower revenue but higher margin can be more valuable to the business than a higher-revenue, thin-margin one.
- Investor and lender conversations — margin trends are one of the first numbers reviewed when assessing operational health.
Margin vs. Markup — They're Not the Same Number
Confusing margin with markup is one of the most common pricing mistakes. Markup is profit as a percentage of cost; margin is profit as a percentage of revenue. A 50% markup does not produce a 50% margin.
| Markup | Resulting margin |
|---|---|
| 10% | 9.09% |
| 25% | 20.00% |
| 50% | 33.33% |
| 100% | 50.00% |
| 150% | 60.00% |
| 200% | 66.67% |
Margin always trails markup because it's calculated on the larger number (revenue) rather than the smaller one (cost).
How to Use This Calculator
- Choose a mode: Find Profit Margin, Find Required Revenue, or Find Maximum Cost.
- For Find Profit Margin, enter Revenue ($) and Cost ($).
- For Find Required Revenue, enter Cost ($) and Desired Margin (%).
- For Find Maximum Cost, enter Revenue ($) and Desired Margin (%).
- Select Calculate to see the result along with the underlying profit figure.
Related Calculations
Once you know your margin, see the Markup Calculator to price individual items, or use the Break-Even Calculator to find the sales volume needed to cover fixed costs.