How to use the profit margin calculator
Enter the selling price customers pay and the product cost associated with one sale. Use the same currency for both amounts, then review the gross profit, profit margin, and markup results. The estimate updates as you change the inputs.
Profit margin formula
Profit margin = (Selling price − Product cost) ÷ Selling price × 100
Gross profit is selling price minus the product cost entered. Profit margin expresses that gross profit as a percentage of the selling price. For a fuller picture of profitability, include additional costs such as payment fees, shipping, labor, advertising, and overhead in a separate calculation.
Example: calculate gross margin
If you sell an item for $100 and its product cost is $65, gross profit is $35. Divide $35 by $100 and multiply by 100 to get a 35% gross profit margin. This means 35 cents of each dollar of selling-price revenue remains after the product cost included in this example.
Profit margin vs. markup
Margin is based on selling price, while markup is based on cost. With a $65 cost and a $100 selling price, the gross margin is 35% and the markup is approximately 53.85%. The percentages answer different questions, so avoid treating them as interchangeable. Use the markup calculator to work backward from cost and a target markup.
What this estimate includes
This calculator subtracts only the product cost you enter. It does not automatically account for operating expenses, discounts, returns, taxes, or transaction fees. For a broader per-order estimate, use the ecommerce profit calculator.
Frequently asked questions
Is gross profit margin the same as net profit margin?
No. Gross margin considers the costs included in gross profit, while net margin accounts for a wider range of business expenses. This tool calculates a simple gross margin from selling price and product cost.
Can profit margin be negative?
Yes. If the entered product cost is higher than the selling price, the calculation produces a loss and a negative margin.
Related calculators
- Markup Calculator – convert a target markup into a selling price.
- Ecommerce Profit Calculator – include fees, shipping, and advertising costs.
- Break-Even Calculator – estimate the sales volume needed to cover fixed costs.