Calculate from
$
$
$
Gross Margin
—
of revenue
Gross Profit
—
revenue − COGS
Markup
—
above cost
Net Margin
—
after operating expenses
Industry Benchmarks (Gross Margin)
SaaS / Software70–80%
Consulting / Services60–70%
E-commerce / Retail30–50%
Manufacturing25–35%
Restaurants / Food10–20%
📐 Key difference: Margin = Profit / Revenue × 100 (e.g. 60% margin on $100 sale = $60 profit). Markup = Profit / Cost × 100 (e.g. 150% markup on $40 cost = $60 profit). Same number, different base.
How to calculate profit margin and markup
Profit margin shows what share of the selling price is profit; markup shows how much you added on top of cost. They describe the same price from different sides and are often confused: a 50% markup is only a 33% margin.
Formula
Gross margin = (Price - Cost) / Price x 100% Markup = (Price - Cost) / Cost x 100% Price for a target margin = Cost / (1 - Margin)
Example
Cost $60, price $100: margin = 40%, markup = 66.7%. To reach a 50% margin on a $60 cost, price at $60 / 0.5 = $120.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit divided by price; markup is profit divided by cost. The same $40 profit on a $100 price is a 40% margin but a 66.7% markup.
What is a good profit margin for a small business?
It varies by industry: services and software often run 20-40% or more, retail and restaurants 3-10% net. Compare with businesses in your sector.
How do I set a price for a target margin?
Divide cost by (1 - target margin). For a 30% margin on a $70 cost: $70 / 0.7 = $100.