Pricing a product or service often comes down to one uncomfortable question: am I charging enough? You know what it costs to make, source, or deliver — but translating that cost into a selling price that actually protects your margin isn't always straightforward.
This profit margin calculator makes that math simple. Enter your total cost and the profit margin you're targeting, and it instantly shows you two things: the revenue (selling price) you need to hit that margin and the exact dollar profit you'll earn per sale.
Instead of guessing at a price and hoping the margin works out, you can work forward from your costs and your goals. Whether you're launching a new product, quoting a client, or re-evaluating your pricing after costs have shifted, this tool gives you a clear answer in seconds. It uses the same standard margin formula relied on by accountants and financial analysts, so the numbers you see here are the same ones that show up on a profit-and-loss statement.
What Is Profit Margin?
Profit margin measures how much of your revenue you actually get to keep. It's expressed as a percentage — and it's one of the clearest indicators of whether a business is financially healthy or just busy.
Say you sell a product for $100 and it costs you $60. Your profit is $40, and your profit margin is 40%. That means for every dollar of revenue, you're keeping 40 cents as profit.
The formula:
Profit Margin (%) = (Revenue − Cost) ÷ Revenue × 100
Why does this matter? Because revenue alone doesn't tell you much. A business doing $500,000 in annual sales with a 5% margin keeps $25,000. A smaller business doing $200,000 at a 30% margin keeps $60,000. The second business is less than half the size in revenue but takes home more than twice the profit. Margin is what separates a growing business from one that's just spinning its wheels.
A 20% margin means you keep $0.20 of every dollar. A 50% margin means you keep $0.50. Those numbers might seem abstract until you multiply them across hundreds or thousands of sales — then they define your business.
The Formula Behind This Calculator
Most margin calculators ask you to plug in your revenue and cost, then spit out your margin percentage. That's useful for looking backward at past sales, but it doesn't help much when you're trying to set a price.
This calculator flips the equation. You enter what you already know — your cost and the margin you want — and it tells you what to charge.
The formula:
Revenue = Cost ÷ (1 − Margin % ÷ 100)
Profit = Revenue − Cost
A worked example: your product costs $500 to produce, and you're targeting a 25% profit margin.
- Revenue = $500 ÷ (1 − 0.25) = $500 ÷ 0.75 = $666.67
- Profit = $666.67 − $500 = $166.67
Quick sanity check — $166.67 ÷ $666.67 = 25%. That confirms the margin is exactly what you targeted.
One thing that catches people off guard: if you want a 25% margin, you can't just add 25% to your cost. Adding 25% to $500 gives you $625, which produces a margin of only 20%, not 25%. The formula above accounts for this correctly, and so does this calculator.
Margin vs. Markup: Know the Difference
Confusing margin and markup is one of the most expensive mistakes in pricing. They sound similar, they both involve percentages, and they even describe the same dollar amount of profit — but they are calculated against different numbers, and the gap between them is bigger than most people expect.
Margin = profit as a percentage of the selling price
Markup = profit as a percentage of the cost
Cost | Selling Price | Profit | Margin | Markup |
|---|---|---|---|---|
$60 | $100 | $40 | 40% | 66.7% |
$75 | $100 | $25 | 25% | 33.3% |
$80 | $100 | $20 | 20% | 25.0% |
$50 | $100 | $50 | 50% | 100.0% |
Look at the last row: achieving a 50% margin means applying a 100% markup. You'd need to double your cost to reach a 50% margin. And a 40% margin requires a 66.7% markup, not 40%.
This matters in practice. If a business owner sets prices using a "30% margin" but is actually applying a 30% markup to the cost, the true margin is only 23.1%. On $100,000 in annual revenue, that mistake leaves roughly $6,900 less profit than expected — real money that was never accounted for.
Converting between the two:
- Markup % = Margin % ÷ (1 − Margin % ÷ 100) × 100
- Margin % = Markup % ÷ (1 + Markup % ÷ 100) × 100
This calculator uses margin. The percentage you enter represents your profit as a share of the final selling price — not a percentage added on top of your cost.
How to Use This Calculator
Two inputs. Two outputs. No guesswork.
- Enter your cost — The total cost to produce, acquire, or deliver the product or service. Include materials, labor, shipping, and any other direct costs. If your product costs $150 to source and get to your warehouse, enter $150.
- Set your target margin — The profit margin you want on each sale, as a percentage. If you want 20% of every sale to be profit, enter 20.
The calculator instantly shows you:
- Revenue — The price you need to charge to achieve that margin
- Profit — The dollar amount you keep after covering costs
Try running a few scenarios. Adjust the margin percentage up and down to see how it affects your selling price — it's a quick way to find the sweet spot between a competitive price and a healthy profit.
Profit Margin Examples
Pricing handmade goods
A candle maker spends $12 per unit on wax, fragrance, packaging, and labels. She wants a 40% margin to cover her time and grow the business.
- Revenue = $12 ÷ 0.60 = $20.00
- Profit = $8.00 per candle
At $20 per candle, she clears $8 in profit on each sale. Sell 500 candles in a month and that's $4,000 in gross profit — enough to reinvest in supplies and marketing while still paying herself.
Quoting a consulting project
A freelance marketing consultant estimates $3,000 in costs for a project (her time valued at an hourly rate, plus software subscriptions and a subcontractor). She targets a 35% margin.
- Revenue = $3,000 ÷ 0.65 = $4,615
- Profit = $1,615 per project
Quoting $4,615 gives her a solid margin. If she priced it at $4,000 instead — thinking "that's about a thousand in profit" — her actual margin would be only 25%, well below her target.
E-commerce product pricing
An online seller sources a phone case for $8 and pays $4 in shipping and packaging per unit — $12 total cost. With marketplace fees and ad spend, he needs at least a 45% margin to stay profitable.
- Revenue = $12 ÷ 0.55 = $21.82
- Profit = $9.82 per unit
At $21.82, each sale generates $9.82 in gross profit. That cushion matters in e-commerce, where ad costs and returns can eat into margins quickly.
Restaurant menu pricing
A chef's signature pasta dish costs $6.50 in ingredients. Restaurants typically target a 65–70% gross margin on food costs to cover labor, rent, and overhead.
- Revenue = $6.50 ÷ 0.35 = $18.57 (at 65% margin)
- Profit = $12.07 per plate
A menu price around $18.50–$19 makes sense. That 65% margin on ingredients isn't pure profit — it funds everything else in the restaurant — but it's the standard benchmark the industry uses to stay viable.
SaaS subscription pricing
A software company spends $180/month per customer on infrastructure, support, and onboarding. They target a 75% margin, which is typical in SaaS.
- Revenue = $180 ÷ 0.25 = $720/month
- Profit = $540/month per customer
At $720/month, each customer contributes $540 toward product development, sales, and net profit. SaaS margins tend to be high because the incremental cost of each additional customer is relatively low once the product is built.
What's a Good Profit Margin?
The honest answer: it depends on your industry, your business model, and what stage you're at. A margin that would be stellar for a grocery store would be a disaster for a consulting firm.
That said, benchmarks help. They give you a reference point so you know whether you're roughly in line with your industry or lagging behind.
Industry | Typical Gross Margin | Typical Net Margin |
|---|---|---|
Software / SaaS | 70–85% | 15–25% |
Professional Services | 50–70% | 15–25% |
Retail (General) | 25–50% | 2–6% |
E-Commerce | 40–60% | 10–20% |
Manufacturing | 25–35% | 5–10% |
Restaurants / Food Service | 60–70% (food cost) | 3–9% |
Construction | 15–25% | 2–7% |
Healthcare | 40–60% | 5–15% |
A few important distinctions:
- Gross margin reflects profit after direct costs — materials, production, direct labor. That's the type of margin this calculator works with.
- Net margin is what's left after every expense: rent, salaries, marketing, taxes, insurance — all of it. Net margins are always significantly lower than gross margins.
- Volume matters as much as percentage. A retailer keeping 4% on $5 million in sales earns $200,000. A consultant keeping 25% on $300,000 earns $75,000. High margin doesn't automatically mean more money in your pocket.
The best comparison is against businesses similar to yours and against your own numbers from previous quarters. If your margins are trending upward, even by a percentage point or two per year, you're building a stronger business.
Practical Ways to Improve Your Profit Margin
Margins don't improve by accident. If yours feel tight, here are specific moves that tend to have the biggest impact:
Test a price increase on your best sellers. A lot of business owners underprice because they're afraid of losing customers. But a 5–10% price increase on products with steady demand rarely causes a meaningful drop in sales — and the margin improvement goes straight to your bottom line. Try it on one product first and track what happens over 30 days.
Renegotiate supplier costs annually. Suppliers expect negotiation, especially if your volume has grown. Even saving 3–5% on your cost of goods translates directly into a wider margin. If your current supplier won't budge, get quotes from competitors — sometimes just having an alternative on the table changes the conversation.
Audit your subscriptions and overhead quarterly. Software tools, marketing platforms, insurance policies, service contracts — costs accumulate. A quarterly review almost always turns up $200–500/month in expenses that are no longer justified. That's $2,400–$6,000 a year flowing back into profit.
Shift your product or service mix toward higher-margin offerings. Not everything you sell earns the same margin. Identify the products or services where your margin is strongest and lean into those with marketing and sales focus. Sometimes the path to better margins isn't selling more — it's selling smarter.
Reduce waste and rework. In manufacturing, food service, and production-based businesses, waste directly eats margin. Tracking waste rates and setting reduction targets — even modest ones like 10–15% less waste per quarter — can meaningfully improve profitability over time.
Bundle and upsell strategically. Adding a complementary product or premium option to an existing sale increases revenue without proportionally increasing cost. If your average order is $50 and you can move it to $60 through a well-chosen add-on, that extra $10 is mostly profit.