Calculate gross margin, net margin, markup and selling price. Works in both directions — enter your costs and price, or enter your target margin to find the right price.
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These two terms are often confused but they measure different things and it's important to understand the distinction when pricing your products or services.
Profit margin is the percentage of the selling price that is profit. If you sell something for £100 and it cost you £70, your profit is £30 and your margin is 30% (£30 ÷ £100).
Margin is always expressed as a percentage of revenue. It tells you how much of every pound of sales you keep as profit.
Markup is the percentage added to the cost price to arrive at the selling price. Using the same example — cost £70, sell £100 — your markup is 42.86% (£30 ÷ £70).
Markup is always higher than margin for the same transaction. This confuses many business owners who think they are making a 40% margin when they are actually making a 40% markup — which is only a 28.6% margin.
Use margin when analysing profitability — it tells you what percentage of revenue you keep. Use markup when pricing products — it tells you how much to add to your cost to hit your target.
Gross margin is calculated before overheads — rent, salaries, marketing, admin. It shows how profitable your core product or service is.
Net margin is calculated after all costs including overheads and tax. It shows the actual bottom-line profitability of your business.
This calculator shows gross margin. To calculate net margin you need to deduct all your fixed overheads from the gross profit figure. Use our Break-Even Calculator to understand how overheads affect your profitability.