Profit margin calculator
What counts as healthy depends entirely on the trade: grocery lives at 3%, software at 80%.
Profit margin is profit divided by selling price. A product costing 50 and selling at 100 has a 50% margin and a 100% markup: the same 50 of profit, divided by two different numbers. To hit a target margin, divide cost by one minus that margin.
How to calculate profit margin
This page calculates gross margin; revenue minus the direct cost of goods. It is deliberately not net margin, which subtracts everything else: rent, wages, marketing, payment fees, returns and tax. A retailer running a 45% gross margin can easily end up at 4% net, and it is the net figure that determines whether the business survives. Gross margin is still the right number for a pricing decision on one product, because it is the only part of the chain that product controls.
Questions
Subtract cost from selling price, divide by the selling price, multiply by 100.
Entirely trade-dependent. Grocery runs on 2–5%, clothing retail 40–60%, software 70–85%. Compare against your own sector, not a general figure.
Cost divided by 0.6. A cost of 50 needs a price of 83.33.
No. A 50% margin is a 100% markup. Margin divides by price, markup divides by cost.
Before. VAT passes through the business and never counts as revenue.