Pricing & margin
Profit Margin (Gross Margin)
Formula reviewed by Tahir Asif, CMA
Profit expressed as a percentage of the selling price, not of cost — always a smaller number than the equivalent markup.
Margin is profit divided by the selling price, not by cost. A price of $15 on a $10 cost yields a 33.3% margin — the same transaction that represents a 50% markup, just measured against the other base.
Margin percentages are always lower than the markup percentage for the same transaction (except at 0%, where they're equal), which is worth remembering when comparing a "50% margin" claim against a "50% markup" claim — they are not the same thing.
Margin %
(Price − Cost) ÷ Price
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