Free tool
Profit Margin Calculator
Turn a price and a cost into the numbers that actually matter — gross profit, profit margin and markup. The foundation for pricing, discounting and deciding how much you can spend on marketing.
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The profit margin formula
Gross profit = Selling price − CostProfit margin = (Gross profit ÷ Selling price) × 100Markup = (Gross profit ÷ Cost) × 100Example calculation
You sell for $100 and it costs you $60. Gross profit is $40, your profit margin is (40 ÷ 100) × 100 = 40%, and your markup is (40 ÷ 60) × 100 = 67%.
What this calculator tells you
Margin tells you how much of each sale you keep; markup tells you how much you add on top of cost. Together they set your pricing floor and reveal how much room you have to discount, advertise and still profit.
Common mistakes
- Confusing markup with margin and overestimating profitability.
- Using only direct cost and forgetting fees, shipping or returns.
- Setting ad budgets without checking margin first.
When this number is misleading
This is gross margin — it only counts the direct cost of the item. It does not include rent, salaries, software or advertising, so a healthy gross margin can still leave you with little or no net profit once overheads are paid. Treat gross margin as a starting point, not proof the whole business is profitable.
How to improve this metric
- Raise prices where your value supports it.
- Reduce cost of goods through better sourcing or volume.
- Shift the mix toward higher-margin products and services.
- Cut discounting that quietly erodes margin.
The number tells you where you are. Not what to do next.
Margin decides what you can afford to spend — the next question is where to spend it.
Cleverlio decides what your business should do this week and writes the work — the posts, the messages, the website copy. You review it and publish it yourself.
See what Cleverlio would doCommon questions
What is profit margin?
Profit margin is the percentage of your selling price that is left as gross profit after the cost of the item. It shows how much of every sale you actually keep before overheads.
What is the difference between margin and markup?
Margin is gross profit as a share of the selling price. Markup is gross profit as a share of the cost. A $40 profit on a $100 price is a 40% margin, but on a $60 cost it is a 67% markup — same money, two different percentages.
How do I calculate profit margin?
Subtract cost from selling price to get gross profit, then divide gross profit by the selling price and multiply by 100. For example, ($100 − $60) ÷ $100 × 100 = 40%.
What is a good profit margin?
It varies hugely by industry. Services often run high margins; retail and food can be thin. Compare against your own products and your industry norms rather than a single universal target.
Why does margin matter for advertising?
Because ROAS and CAC are meaningless without it. A 3x ROAS can lose money on a thin-margin product and print money on a high-margin one. Knowing your margin tells you how much you can afford to spend to win a sale.