How to Calculate Profit Margin
Profit margin is the percentage of revenue that remains as profit after deducting the cost of goods. It is one of the most important metrics for any business, ecommerce seller, or freelancer.
Profit Margin (%) = ((Revenue − Cost) ÷ Revenue) × 100
For example, if you buy a product for $30 and sell it for $50, your profit is $20 and your profit margin is 40%. This means 40 cents of every dollar earned is profit.
Margin vs Markup — What's the Difference?
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. Both are useful, but they give different numbers for the same transaction.
Markup (%) = ((Selling Price − Cost) ÷ Cost) × 100
Amazon sellers, Etsy shop owners, and retail businesses often confuse these two. Use our calculator above to find both values at once, so you always price with confidence.
What is a Good Profit Margin?
It depends on the industry. A 10% net profit margin is considered average, 20% is good, and anything above 30% is excellent for most product-based businesses. Service businesses often achieve 50–70% gross margins.
For ecommerce (Amazon, Etsy, Shopify), most successful sellers aim for a gross margin of at least 30–40% after accounting for product cost, shipping, and platform fees.
Frequently Asked Questions
What is the formula for profit margin?
Profit Margin (%) = ((Revenue − Cost) ÷ Revenue) × 100. For example, if your cost is $30 and you sell for $50, your profit margin is (($50−$30) ÷ $50) × 100 = 40%.
What is the difference between gross margin and net margin?
Gross margin only subtracts the direct cost of making or buying a product from revenue. Net margin subtracts all expenses including rent, salaries, taxes, and operating costs. Net margin is always lower than gross margin.
How do I find the selling price from cost and desired margin?
Use the formula: Selling Price = Cost ÷ (1 − Desired Margin%). For example, if your cost is $40 and you want a 40% margin: $40 ÷ (1 − 0.40) = $40 ÷ 0.60 = $66.67. Our Selling Price Finder tab does this automatically.
Is this calculator free to use?
Yes, 100% free. No signup, no account, no limits. Use it as many times as you need.
Can I use this for Amazon or Etsy pricing?
Absolutely. Enter your total cost (including product cost + shipping + platform fees) as your "Cost Price", and your listing price as "Revenue". The calculator will show your actual profit margin after all costs.