Calculator

Profit Margin Calculator

Calculate profit and profit margin from revenue and cost. Use it to evaluate product pricing, service jobs, invoices, or project economics before overhead and tax assumptions get more complex.

Result

Profit margin: 35%
Profit: $3,500.00

How profit margin calculation works

The calculator subtracts cost from revenue to calculate profit.

It then divides profit by revenue and converts the result to a percentage. This means margin measures how much of each revenue dollar remains after the costs you entered.

The result is only as complete as the cost input. Direct product cost produces a gross margin style result, while including labor, fees, and overhead produces a broader project margin.

Useful next steps

Use the break-even calculator when fixed costs and sales volume matter more than margin alone.
Use the commission calculator if sales payouts should be modeled as part of cost.

Profit margin formula

profit = revenue - cost; marginPercent = (profit / revenue) * 100

Profit margin is revenue-based. Use markup when you want to divide profit by cost instead.

revenue is total sales or income for the item measured.
cost is the cost basis included in the margin calculation.
profit is revenue minus cost.

What the Numbers Mean

Revenue: Total sales or income for the item, order, job, or period being measured.
Cost: The cost basis included in the calculation. Use direct costs for gross-style margin or broader costs for project margin.
Profit: Revenue minus cost. This is the dollar amount kept before any costs not included in the input.
Profit margin: Profit as a percentage of revenue. This is not the same as markup.

Assumptions

Revenue must be greater than zero because margin divides by revenue.
The calculator uses the cost value entered and does not classify costs automatically.
Taxes, overhead, shipping, commissions, and fees are excluded unless included in cost.
Margin can be negative when cost is greater than revenue.
Use break-even when fixed costs and sales volume are the main decision factors.

Worked Examples

Product batch

Input: $12,000 revenue and $7,800 cost
Output: $4,200 profit and 35% margin

Profit is 4,200, and 4,200 divided by 12,000 equals 35%.

Service project

Input: $8,500 revenue and $6,375 cost
Output: $2,125 profit and 25% margin

The project keeps 25 cents of each revenue dollar after the included costs.

Loss scenario

Input: $5,000 revenue and $5,600 cost
Output: -$600 profit and -12% margin

When cost exceeds revenue, both profit and margin are negative.

Common Profit Margin Examples

Use these revenue-and-cost examples as quick references before entering your own numbers.

Example	Cost	Profit	Profit margin
$5,000 revenue	$3,500	$1,500	30%
$10,000 revenue	$6,500	$3,500	35%
$12,000 revenue	$7,800	$4,200	35%
$20,000 revenue	$15,000	$5,000	25%
$50,000 revenue	$37,500	$12,500	25%

Margin depends on which costs are included. Direct costs, fees, commissions, and overhead can produce different margins.

When Profit Margin Changes

Margin moves when revenue, price, or cost changes. The same business can look different after fees, discounts, or cost increases.

Base case

$10,000 revenue and $6,500 cost

35% margin

Profit is $3,500, which is 35% of revenue.

Cost rises

$10,000 revenue and $7,500 cost

25% margin

Higher cost reduces profit to $2,500 and lowers margin.

Price falls

$9,000 revenue and $6,500 cost

27.78% margin

Discounting revenue while cost stays fixed compresses margin.

Related Guides for Margin Decisions

Use these pages when the decision depends on markup, gross profit, or break-even volume.

Markup vs marginClarify why markup and margin percentages are not interchangeable.Markup calculatorAnalyze profit as a percentage of cost.Gross profit calculatorFocus on profit dollars before comparing percentages.Break-even calculatorEstimate required unit volume when fixed costs matter.

Frequently Asked Questions

Is profit margin the same as markup?

No. Margin divides profit by revenue. Markup divides profit by cost.

Can margin be negative?

Yes. If cost exceeds revenue, profit is negative and margin is negative.

What costs should I include?

Include the costs relevant to the margin you are measuring, such as direct costs for gross margin or broader costs for operating margin.

What is a good profit margin?

A good margin depends on industry, risk, sales cycle, and cost structure. Compare against your own targets and comparable businesses rather than using one universal threshold.

Why can margin be lower than markup?

Margin divides profit by revenue, while markup divides profit by cost. Because the denominator is different, the percentages are not interchangeable.

When should this not be used?

Do not use a simple margin calculation when cash timing, fixed costs, inventory write-downs, or contribution margin are the dominant decision factors.

Related Calculators

Continue with the closest next calculation instead of starting from a generic directory.

Gross profit vs profit margin guideCompare profit dollars with percentage profitability before choosing the metric.Markup vs margin guideClarify why cost-based markup and revenue-based margin produce different percentages.Gross profit calculatorFocus on profit dollars before comparing percentages.Markup calculatorCalculate cost-based markup and compare it with margin.Cost plus pricing calculatorSet a selling price from cost and target markup.Calculate break-even units from margin inputsUse fixed costs, price, and variable cost to estimate required sales volume.Price per unit calculatorNormalize total price before evaluating margin.Estimate commission on sales revenueCalculate gross commission when sales compensation affects profitability.Set a freelance hourly rate with overheadPrice billable work so target income, overhead, and tax reserves are covered.

Disclaimer

This calculator is a simplified margin tool and does not replace accounting advice or full financial statement analysis.

Enter your numbers