profitMargin.title
profitMargin.description
common.enterDetails
common.fillInFields
profitMargin.productDetails
comparison.productCostHelp
Price you're selling to customers
profitMargin.marginVsMarkup
Margin: profitMargin.marginDescription
Markup: profitMargin.markupDescription
Example: $50 cost, $100 price = 50% margin, 100% markup
common.enterAmountToCalculate
Understanding Profit Margin & Markup
Profit margin and markup are two related but different ways to measure profitability:
Profit Margin
Profit margin shows profit as a percentage of the selling price.
Formula: (Selling Price - Cost) / Selling Price × 100
Example: Product costs $50, sells for $100
Margin = ($100 - $50) / $100 = 50%
Markup Percentage
Markup shows profit as a percentage of the cost.
Formula: (Selling Price - Cost) / Cost × 100
Example: Product costs $50, sells for $100
Markup = ($100 - $50) / $50 = 100%
Tips for Optimal Pricing
- Retail products typically have 30-50% profit margins
- Service businesses often target 40-60% margins
- Remember to account for marketplace fees when setting prices
- Set aside time each month to review costs, margins, and price adjustments
Frequently Asked Questions
What's the difference between margin and markup?
Margin is profit as a percentage of selling price, while markup is profit as a percentage of cost. A 50% margin equals a 100% markup. They're both ways to measure profitability, but margin is more commonly used in business reporting.
What's a good profit margin?
It varies by industry. Retail typically sees 20-50% margins, while service businesses may see 40-60%. High-volume, low-margin businesses (like grocery stores) operate on 2-5% margins. Research your specific industry benchmarks.
Should I use gross or net profit?
This calculator shows gross profit (selling price minus direct costs). For net profit, subtract all business expenses (overhead, marketing, salaries, etc.) from your gross profit.
How do marketplace fees affect my margin?
Marketplace fees reduce your net proceeds, effectively lowering your profit margin. Always calculate fees (eBay, Amazon, PayPal, etc.) when setting your selling price to maintain your target margin.
common.disclaimer: This calculator provides estimates based on current marketplace fee structures. Actual fees may vary based on your account type, location, product category, and other factors. Always verify fees directly with the platform before making business decisions.