Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a percentage of revenue (selling price): (revenue − cost) ÷ revenue. Markup is profit as a percentage of cost: (revenue − cost) ÷ cost. A 50% markup gives a 33% margin. Margin is always smaller than markup for the same transaction.
How do I convert between margin and markup?
Margin to markup: markup = margin / (1 − margin). Markup to margin: margin = markup / (1 + markup). For example, 25% margin = 33.3% markup; 100% markup = 50% margin.
What is a good profit margin?
It varies by industry. Grocery retail: 1–3%. General retail: 5–10%. Software/SaaS: 60–80%. Services: 15–30%. Compare against your industry benchmarks rather than a universal number.
Is gross margin or net margin more important?
This calculator shows gross margin (revenue minus direct cost of goods). Net margin also subtracts operating expenses, taxes, and overhead. Gross margin measures product-level profitability; net margin measures business-level profitability. Both matter for different decisions.
Why can margin never be 100%?
Because margin = profit ÷ revenue. For margin to be 100%, profit would have to equal revenue, meaning cost is zero. In practice cost is always positive, so margin is always below 100%. Markup, however, can exceed 100% (meaning you sell for more than double the cost).