Gross Profit
$400.00
Gross Margin
40.00%
Markup
66.67%
Rev/$1 Cost
$1.67
Profit: $400.00
Closest to E-Commerce industry
$1,000.00
$600.00
40.00%
66.67%
Profit Margin = (Revenue - Cost) ÷ Revenue × 100. Example: Sell product for $100, cost is $60. Margin = ($100 - $60) ÷ $100 × 100 = 40% profit margin. This means 40 cents of every dollar is profit.
| Selling Price | Cost | Profit | Profit Margin |
|---|---|---|---|
| $50 | $30 | $20 | 40% |
| $100 | $60 | $40 | 40% |
| $100 | $75 | $25 | 25% |
| $200 | $120 | $80 | 40% |
Margin = profit as % of selling price. Markup = profit as % of cost. Same profit, different base. 50% markup = 33.3% margin. 100% markup = 50% margin. Margin is always lower than markup for same profit.
| Cost | Markup % | Selling Price | Margin % |
|---|---|---|---|
| $60 | 50% | $90 | 33.3% |
| $60 | 100% | $120 | 50% |
| $60 | 150% | $150 | 60% |
| $60 | 200% | $180 | 66.7% |
Profit margins vary dramatically by industry. Software/SaaS: 70-80% gross, 20-30% net. Retail grocery: 25-35% gross, 1-3% net. Professional services: 50-70% gross, 15-25% net. Manufacturing: 25-40% gross, 5-15% net.
| Industry | Gross Margin | Net Margin | Notes |
|---|---|---|---|
| Software/SaaS | 70-85% | 20-30% | High margin, scalable |
| Professional Services | 50-70% | 15-25% | Labor is main cost |
| E-commerce | 40-60% | 5-15% | Depends on product type |
| Restaurants | 60-70% | 3-9% | Thin net margins |
| Grocery Retail | 25-35% | 1-3% | Volume-based business |
| Manufacturing | 25-40% | 5-15% | Capital intensive |
Markup to Margin: Margin = Markup ÷ (1 + Markup). Margin to Markup: Markup = Margin ÷ (1 - Margin). Example: 50% markup = 50 ÷ 150 = 33.3% margin. 40% margin = 40 ÷ 60 = 66.7% markup.
| Markup % | Margin % | Conversion |
|---|---|---|
| 25% | 20% | 0.25 ÷ 1.25 = 0.20 |
| 50% | 33.3% | 0.50 ÷ 1.50 = 0.333 |
| 100% | 50% | 1.00 ÷ 2.00 = 0.50 |
| 200% | 66.7% | 2.00 ÷ 3.00 = 0.667 |
Selling Price = Cost ÷ (1 - Target Margin). For 40% margin on $60 cost: Price = $60 ÷ (1 - 0.40) = $60 ÷ 0.60 = $100. This gives you $40 profit, which is 40% of the $100 selling price.
| Cost | Target Margin | Calculation | Selling Price |
|---|---|---|---|
| $50 | 50% | $50 ÷ 0.50 | $100 |
| $60 | 40% | $60 ÷ 0.60 | $100 |
| $70 | 30% | $70 ÷ 0.70 | $100 |
| $100 | 25% | $100 ÷ 0.75 | $133.33 |
Gross margin = (Revenue - COGS) ÷ Revenue - only direct costs. Net margin = (Revenue - ALL costs) ÷ Revenue - including operating expenses, taxes, interest. A business can have high gross margin but low net margin due to overhead.
| Margin Type | What It Includes | Example ($100K Revenue) | Typical Range |
|---|---|---|---|
| Gross Margin | Revenue - Direct costs (COGS) | $60K profit → 60% | 25-80% |
| Operating Margin | Gross - Operating expenses | $30K profit → 30% | 10-30% |
| Net Margin | Operating - Taxes, interest | $15K profit → 15% | 2-20% |
Inputs
Result
Profit = $1,000 - $600 = $400. Profit Margin = ($400 / $1,000) x 100 = 40.00%. Markup = ($400 / $600) x 100 = 66.67%. A 40% margin means 40 cents of every sales dollar is profit.
Inputs
Result
Profit = $2,500 - $1,750 = $750. Profit Margin = ($750 / $2,500) x 100 = 30.00%. Markup = ($750 / $1,750) x 100 = 42.86%. Note that 30% margin corresponds to a 42.86% markup -- they are not the same.
Profit Margin = ((Revenue - Cost) / Revenue) x 100The percentage of revenue that becomes profit. Shows how much of each dollar of sales is profit.
Where:
Revenue= Total sales or selling priceCost= Total cost or expensesMarkup = ((Revenue - Cost) / Cost) x 100The percentage added to cost to arrive at the selling price.
Where:
Revenue= Total sales or selling priceCost= Total cost or expensesProfit = Revenue - CostThe absolute dollar amount of profit (or loss if negative).
Where:
Revenue= Total sales incomeCost= Total expensesProfit margin measures profitability as a percentage of revenue. It shows how much of each dollar in sales becomes profit.
Gross margin excludes operating expenses, while net margin includes all costs. Higher margins indicate better profitability.
Markup is based on cost, while margin is based on price. Understanding both helps with pricing strategy.
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Last Updated: Feb 12, 2026
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