Profit Margin Calculator

Use this free Profit Margin Calculator to find out your profit percentage, cost, or selling price. Perfect for business owners and eCommerce sellers.

What Is a Profit Margin?

Profit margin represents the percentage of profit earned from total sales revenue. It’s a vital financial metric that shows how efficiently your business turns revenue into profit. In simple terms, it tells you how much money you keep after covering all the costs.

For example, if your product costs $50 to produce and you sell it for $100, your profit margin is 50%. This means that for every dollar of sales, you keep 50 cents as profit.

How to Calculate Profit Margin

The formula for profit margin is straightforward:

Profit Margin (%) = (Selling Price - Cost Price) / Selling Price × 100

Example:
If your cost is $30 and selling price is $45,
Profit Margin = (45 – 30) / 45 × 100 = 33.33%

Why Profit Margin Is Important

• Evaluate business performance
• Set better pricing strategies
• Compare profitability across products
• Identify areas for cost optimization

Businesses with higher margins usually have more flexibility to reinvest and grow. On the other hand, low margins may indicate pricing or cost issues that need attention.

Difference Between Profit Margin, Markup, and ROI

Many people confuse profit margin with markup or ROI. Here’s a simple comparison:

• Profit Margin → based on selling price
• Markup → based on cost price
• ROI → measures return relative to total investment

Example:
If a product costs $50 and sells for $100:
Profit Margin = 50%
Markup = 100%
ROI = depends on the full investment, not just cost.

How to Improve Your Profit Margin

1. Reduce production costs. Negotiate better supplier deals or streamline operations.
2. Increase prices carefully. Use perceived value or branding to justify higher prices.
3. Focus on high-margin products. Identify and promote the items that bring more profit.
4. Use automation tools. Save time and reduce errors in pricing and accounting.