Gross Profit Margin
Calculator

Instantly calculate gross profit, gross profit margin (GP %), and markup from any two values. Fast, accurate, and built for retailers, freelancers, and small businesses. Includes the markup vs margin difference explained.

✓ Gross Profit (GP) ✓ Margin % ✓ Markup % ✓ Selling Price ✓ Markup ↔ Margin ✓ Instant Results
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Gross Profit Margin Calculator
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What you paid for the product
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What you sell it for
Gross Profit Margin
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Gross Profit
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per unit
Margin %
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of revenue
Markup %
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of cost
Cost
Profit
Cost of Goods Gross Profit
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Markup vs Margin

Same sale, different base — common conversions

Markup= Margin
10%9.1%
25%20.0%
50%33.3%
75%42.9%
100%50.0%
150%60.0%
200%66.7%
300%75.0%
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Typical Margins by Industry

Typical gross margin benchmarks

Software / SaaS70–90%
Restaurants (food)60–70%
Jewellery40–60%
Apparel / Fashion40–60%
General Retail20–50%
Manufacturing20–35%
Electronics5–25%
Grocery5–15%
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How to Calculate Gross Profit (GP)

Gross profit is the money your business keeps from a sale after subtracting the direct cost of the goods sold. It is the single most important number for understanding whether your products are actually profitable before overheads.

Gross Profit = Revenue − Cost of Goods Sold (COGS)

Gross Profit Margin (%) = (Revenue − Cost) ÷ Revenue × 100

Markup (%) = (Revenue − Cost) ÷ Cost × 100

Example: Sell for $100, cost $60
Gross Profit = $100 − $60 = $40
Margin = $40 ÷ $100 = 40%
Markup = $40 ÷ $60 = 66.7%

Markup vs Margin: The Difference That Costs Businesses Money

This is the single most common and expensive mistake in pricing. Markup and margin are not the same thing, even though they describe the same transaction.

Margin is your profit as a percentage of the selling price. Markup is your profit as a percentage of the cost. Because cost is always lower than selling price, the markup percentage is always higher than the margin percentage for the same sale.

Here is why it matters: if you want a 40% margin but accidentally apply a 40% markup to your cost, you will badly underprice your product. On a $60 item, a 40% markup gives an $84 price (only 28.6% real margin), while a true 40% margin requires a $100 price. That is $16 of lost profit on every single unit — which compounds enormously across thousands of sales.

Markup to Margin Conversion Table

Markup %Equivalent Margin %On $100 Cost, Sell For
10%9.1%$110.00
20%16.7%$120.00
25%20.0%$125.00
30%23.1%$130.00
40%28.6%$140.00
50%33.3%$150.00
75%42.9%$175.00
100%50.0%$200.00
150%60.0%$250.00
200%66.7%$300.00
300%75.0%$400.00
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Everything You Need to Know About Gross Profit

📊 Gross Profit vs Net Profit

Gross profit subtracts only the direct cost of goods sold. Net profit subtracts everything — rent, salaries, marketing, tax, interest. A business can have a healthy 50% gross margin but still lose money overall if operating expenses are too high. Gross profit measures product profitability; net profit measures whether the whole business works.

🎯 Pricing for a Target Margin

To hit a target margin, divide cost by (1 − margin) as a decimal. For a 40% margin on a $60 item: $60 ÷ 0.60 = $100. Never add the margin percentage directly to cost — that gives you a markup, not a margin, and underprices your product. Use the Cost & Margin mode above to do this automatically.

💷 What Is a Good Gross Margin?

It depends entirely on industry. Software runs 70-90%, restaurants 60-70%, general retail 20-50%, grocery just 5-15%. Compare yourself to your specific industry, not a universal number. A 25% margin is excellent for a grocer but alarming for a software company.

📈 Why Margin Beats Markup for Decisions

Margin is more useful for business decisions because it directly tells you what fraction of revenue you keep. If your margin is 30%, you know that $0.30 of every $1 in sales is gross profit available to cover overheads. Markup doesn't give you this immediately — it's a pricing tool, while margin is a profitability measure.

🛒 Retail & E-commerce Pricing

Online sellers must factor platform fees, payment processing (2-3%), shipping, and returns into true cost before calculating margin. A product showing 40% margin on paper may have a real margin closer to 25% after Amazon/Etsy/Shopify fees. Always calculate margin on fully-loaded cost, not just the wholesale price.

⚠️ The Discount Trap

Discounts destroy margin faster than most people realise. On a product with a 40% margin, a 20% discount cuts your gross profit in half — not by 20%. You'd need to sell twice the volume just to make the same total profit. Always calculate the margin impact before running a promotion.

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Frequently Asked Questions

Gross profit (GP) is the money a business keeps from sales after subtracting the direct cost of producing or buying the goods sold. The formula is: Gross Profit = Revenue − Cost of Goods Sold (COGS). For example, if you sell a product for $100 that cost you $60, your gross profit is $40. Gross profit does not account for operating expenses like rent, salaries, or marketing — only the direct cost of the goods.
Gross profit margin is gross profit expressed as a percentage of revenue. The formula is: Gross Profit Margin (%) = (Revenue − Cost) ÷ Revenue × 100. For example, if you sell an item for $100 that cost $60, the gross profit is $40, and the gross profit margin is $40 ÷ $100 × 100 = 40%. This tells you what percentage of each sale you keep as gross profit.
Markup and margin both measure profit but use a different base. Margin is profit as a percentage of the selling price, while markup is profit as a percentage of the cost. For a product costing $60 sold at $100: the margin is 40% ($40 profit ÷ $100 price), but the markup is 66.7% ($40 profit ÷ $60 cost). The same transaction always shows a higher markup percentage than margin percentage. Confusing these two is one of the most common and costly pricing mistakes in business.
To convert markup to margin: Margin = Markup ÷ (1 + Markup), using decimals. For example, a 50% markup converts to a margin of 0.5 ÷ 1.5 = 0.333 = 33.3%. To convert margin to markup: Markup = Margin ÷ (1 − Margin). A 40% margin converts to a markup of 0.4 ÷ 0.6 = 0.667 = 66.7%. Our calculator does this conversion automatically.
A good gross profit margin varies significantly by industry. Retail typically runs 20-50%, restaurants 60-70% on food, software and SaaS often 70-90%, manufacturing 20-35%, and grocery stores as low as 5-15%. As a general rule, a gross margin above 50% is considered healthy for most product businesses, but the right benchmark depends entirely on your specific industry and business model.
To calculate selling price from cost and a target margin: Selling Price = Cost ÷ (1 − Margin), using the margin as a decimal. For example, if a product costs $60 and you want a 40% margin: Selling Price = $60 ÷ (1 − 0.40) = $60 ÷ 0.60 = $100. This is the correct way to price for a target margin — a common mistake is to instead add the margin percentage directly to the cost, which produces the wrong price.
Using the wrong one destroys profitability. If you want a 40% margin but mistakenly apply a 40% markup to your cost, you will significantly underprice your product. On a $60 cost item, a 40% markup gives a $84 price (only 28.6% actual margin), while a true 40% margin requires a $100 price. That pricing error means losing $16 of profit on every single unit sold — which compounds enormously across thousands of transactions.
Gross profit is revenue minus only the direct cost of goods sold (COGS). Net profit is what remains after subtracting ALL expenses — operating costs, rent, salaries, marketing, taxes, interest, and more. A business can have a strong 50% gross profit margin but still be unprofitable on a net basis if operating expenses are too high. Gross profit measures product profitability; net profit measures overall business profitability.

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