Profit margin calculator
Free. Runs in your browser, nothing is uploaded.Profit margin is the share of each sale you keep as profit. The formula is margin = (revenue - costs) ÷ revenue × 100, so a product that sells for $40 and costs $16 to make has a 60% gross margin.
What do you want to work out?
One unit's price, or your total sales for a period.
What those units cost you to make or buy.
- Gross profit
- $24.00
- Markup
- 150%
Formula with your numbers
Gross margin = (revenue - cost of goods) ÷ revenue × 100
= ($40.00 - $16.00) ÷ $40.00 × 100
= 60%
How to use the profit margin calculator
- Pick what to work out.
- Gross margin: enter revenue and the cost of goods.
- Net margin: add every other cost to see what is left at the end.
- Price for a margin: enter the cost and the margin you want to get the selling price.
- Max cost: enter the price and the margin you want to see the most you can pay per unit.
- Use one unit or one period. Enter a single product's price and costs, or a month's total sales and total costs. Just keep every number for the same units or the same period.
- Read the margin with its profit. Each result shows the profit in money and the markup next to the margin, so a high percentage on a tiny sale does not fool you.
Profit margin formulas, with worked examples
Gross margin
Gross margin = (revenue - cost of goods) ÷ revenue × 100
A linen dress sells for $40 and costs $16 to make: ($40 - $16) ÷ $40 × 100 = 60%. Gross profit is $24 per dress.
Net margin
Net margin = (revenue - cost of goods - other costs) ÷ revenue × 100
The same dress also costs $5 to ship, $2 in payment fees and $5 of ad spend per order, so $12 of other costs: ($40 - $16 - $12) ÷ $40 × 100 = 30%. Net profit is $12 per dress.
Price for a target margin
Price = cost ÷ (1 - margin)
To keep a 60% margin on a $16 cost: $16 ÷ (1 - 0.60) = $40. Adding 60% to the cost instead gives $25.60, which is only a 37.5% margin.
Most you can pay per unit
Cost = price × (1 - margin)
To sell at $40 and keep a 60% margin, each unit can cost at most $40 × 0.40 = $16.
Gross margin vs net margin
Gross margin only takes away what the product itself costs you: making or buying it, plus inbound freight and duties. It tells you whether the product is worth selling at that price.
Net margin takes away everything: shipping to the customer, packaging, payment and marketplace fees, returns, ad spend, software, rent and wages. It tells you whether the business makes money.
Some people also work out operating margin, which removes running costs but leaves out interest and taxes. Whichever you use, compare like with like: the same costs, over the same period, against the same revenue.
| Gross margin | Markup | Price of a $10 item |
|---|---|---|
| 20% | 25% | $12.50 |
| 33.3% | 50% | $15.00 |
| 50% | 100% | $20.00 |
| 60% | 150% | $25.00 |
| 75% | 300% | $40.00 |
Margin divides profit by the price, markup divides it by the cost. To go from one to the other, use the markup calculator.
Margin and your ad budget
Your gross margin sets how much you can spend on ads for each sale before you lose money. With a 60% margin, every $1 of revenue leaves $0.60 to pay for ads and every other cost.
Break-even ROAS = 1 ÷ gross margin
A 60% margin breaks even at a ROAS of 1 ÷ 0.60 = 1.67x, before shipping and fees. A 30% margin needs 3.33x. That is why a low-margin product can look fine on the shelf and still lose money in ads. Work it out with your real costs in the break-even ROAS calculator.
When you plan a campaign in Ad Autopilot, it asks for your gross margin and average order value, then works out break-even ROAS, a target ROAS and a target CPA in code and runs your Meta and Google Ads campaigns against those targets.
Turn your margins into ad targets
Ad Autopilot takes your gross margin and order value, works out the ROAS and CPA your Meta and Google Ads campaigns need, runs them against those targets, and by default brings each change to you for approval.
See how Ad Autopilot worksQuestions
How do you calculate profit margin?
Subtract the costs from the revenue, divide by the revenue and multiply by 100. A $40 sale with $16 of product cost has a ($40 - $16) ÷ $40 × 100 = 60% gross margin.
What is the difference between gross and net profit margin?
Gross margin only subtracts the cost of the goods. Net margin subtracts every cost, including shipping, fees, ads and overheads, so it is always lower than gross margin.
How do I price a product for a 50% margin?
Divide the cost by 1 minus the margin. A $20 cost at a 50% margin is $20 ÷ 0.5 = $40. Doubling the cost always gives a 50% margin, which is the same as a 100% markup.
Is margin the same as markup?
No. Margin is profit divided by the selling price and markup is profit divided by the cost. A 60% margin is a 150% markup, and a 50% markup is only a 33.3% margin.
What is a good profit margin?
It depends on the product and how you sell it. The useful check is whether your gross margin leaves room for shipping, fees and the ad spend it takes to win each order, which the break-even ROAS shows.
Can profit margin be negative?
Yes. If costs are higher than revenue the margin is below zero, which means you lose money on each sale or over the period. The calculator flags it in red.