Profit Margin Calculator — margin, markup, price and break-even

How to calculate profit margin

Profit margin is the share of the selling price that you keep as profit. Subtract the cost from the price, divide by the price and multiply by 100: margin % = (price − cost) ÷ price × 100. A product that costs €60 and sells for €100 makes €40 of profit, so the margin is 40 ÷ 100 = 40%: you keep 40 cents of every euro of sales.

Margin vs markup: the difference

Markup uses the same profit but divides it by the cost instead of the price: markup % = (price − cost) ÷ cost × 100. The €60 product sold at €100 has a 40% margin but a 66.7% markup (40 ÷ 60). Because the cost is always smaller than the price when you make a profit, markup is always the bigger number. Mixing them up is the most common pricing mistake: adding a 40% markup to a €60 cost gives €84, which is only a 28.6% margin. To convert, use margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin).

How to set a price for a target margin

Divide the cost by one minus the margin: price = cost ÷ (1 − margin). For a 40% margin on a €60 cost that is 60 ÷ 0.6 = €100. Simply adding 40% to the cost does not work, because the margin is measured against the price, not the cost. A margin can never reach 100%: that would mean a cost of zero. Keystone pricing, doubling the cost, is a 100% markup and therefore a 50% margin.

Margins and VAT

VAT (or sales tax) is collected for the government, so it is not part of your revenue. Work out margins on the price without VAT. In Belgium, where the standard VAT rate is 21%, a product sold for €121 including VAT brings in €100; with a €60 cost the margin is 40%. Calculated on the €121 shelf price it would look like 50.4%, which overstates your profit. Tick prices include VAT and the calculator removes the VAT first.

What a discount really costs

A discount comes straight out of your profit, not out of your cost. Take the €100 product with a €60 cost: at 20% off it sells for €80, profit falls from €40 to €20 and the margin from 40% to 25%. To earn the same total profit you now have to sell twice as many units, 100% more. The general rule is extra units needed = old profit per unit ÷ new profit per unit − 1. The thinner your margin, the more a discount hurts: with a 25% margin, 25% off means you earn nothing at all on each sale.

Break-even point

The break-even point is the number of units at which revenue covers all costs and profit is exactly zero: break-even units = fixed costs ÷ (price − variable cost per unit). The amount each unit adds after its own variable cost is its contribution. With €5,000 of monthly fixed costs, a €30 variable cost and an €80 price, each unit contributes €50, so you break even at 100 units or €8,000 of revenue. The contribution margin is 50 ÷ 80 = 62.5%. If you expect to sell 150 units you make €2,500 profit, and sales could drop by a third (the margin of safety, 33.3%) before you make a loss.

Gross, operating and net margin

The same idea applies to a whole business, at three levels of the income statement:

• Gross margin = (revenue − cost of goods sold) ÷ revenue: how much each sale leaves to pay for running the business.
• Operating margin = operating profit ÷ revenue, after salaries, rent, marketing and other operating expenses.
• Net margin = net profit ÷ revenue, after interest and income tax: the bottom line.

For example: €250,000 of sales and €140,000 cost of goods give a gross profit of €110,000, a 44% gross margin. €70,000 of operating expenses leave €40,000 operating profit, 16%. After €5,000 interest and 25% tax on the remaining €35,000, net profit is €26,250: a 10.5% net margin.

What is a good profit margin?

It depends entirely on the industry, which is why the calculator compares your result with industry averages instead of using one "good" number. In January 2026 the average gross margin of all US listed companies was 37.8% and the average net margin 9.7%, according to the data set of Aswath Damodaran at NYU Stern. Software companies averaged a 71.7% gross and 25.5% net margin; grocery and food retailers 26.3% gross but only 1.3% net; restaurants 32.2% gross and 9.4% net; car and truck makers 10.4% gross and 1.3% net. A grocer with a 2% net margin can be doing well while a software company with 10% is lagging. Compare yourself with businesses like yours, and with your own figures from previous years.

How to improve your margin

• Price on value, not only on cost: small price increases go straight to profit.
• Lower the cost of goods: better purchase prices, less waste, fewer returns.
• Sell more of the high-margin products: the batch table shows which ones they are.
• Be careful with discounts: check the extra volume they need before you run them.
• Watch fixed costs: they decide your break-even point.

Share a calculation

The address bar always holds your current numbers, so copy link gives a link that opens the same calculation, for example ?cost=60&price=100, ?mode=target&cost=60&target=40, ?mode=discount&price=100&cost=60&discount=20 or ?mode=breakeven&fixed=5000&variable=30&price=80. Add &vat=21 for prices including VAT and &cur=USD for another currency. Older links with ?revenue= or ?tab= still work. Nothing is sent anywhere: the calculator runs in your browser and only remembers your last inputs on this device.

This calculator is a tool for estimates, not financial or tax advice; check important decisions with your accountant.