Calculator

Profit Margin Calculator

A $30 price and $20 cost gives a 33.3% margin and a 50% markup, or $10 profit per unit. Margin tells you what fraction of every sale is yours to keep; markup tells you how much you added over cost.

Results

Visualization

Cashbizly provides illustrative business estimates only. Results depend on your inputs and assumptions and are not accounting, tax, or legal advice. Consult a CPA or financial advisor before major decisions. Tax-year figures (mileage, QBI, SEP, etc.) are labelled by year and should be verified at IRS.gov.

How It Works

Margin% = (Price - Cost) / Price. Markup% = (Price - Cost) / Cost. They converge only at 100% margin (free cost). Restaurant and retail benchmarks often target 30-60% margins depending on the category; below your operating-expense ratio you are losing money on volume.

What Should You Do?

Scenario 1: a salon charging $80 for a service costing $32 has a 60% margin. Scenario 2: a retailer with a 25% margin must turn inventory 4x faster than one with a 50% margin to earn the same profit per dollar stocked. Scenario 3: if your overhead runs 40% of revenue, any product under 40% margin drains cash.

Frequently Asked Questions

What is a good profit margin for a small business?

It varies by industry — grocery and retail often run 2-6% net, while software and services can exceed 20-40%. Compare against your category, not a universal number.

Why does margin matter more than markup?

Margin reflects what you keep relative to what the customer pays, which is what pays your overhead. Markup hides whether high-volume sales actually cover fixed costs.

How do I improve margin without raising price?

Lower unit cost (better sourcing, less waste), drop unprofitable SKUs, or bundle to raise perceived value. See our Food Cost and Labor Cost tools for industry specifics.

Authoritative References

Investopedia — Profit Margin — Margin definition and formula.
SBA — Manage Your Finances — Small-business profitability fundamentals.