E-Commerce Finance
Profit Margin & Markup Calculator
The Profit Margin and Markup Calculator turns a unit cost and a selling price into the three numbers every product decision depends on: gross profit, profit margin, and markup. Enter your cost and your price and it returns the profit per unit, the margin as a percentage of price, and the markup as a percentage of cost. The result clears up the most common pricing confusion, because margin and markup describe the same profit measured against two different bases.
Who it's for: Shopify and DTC founders and merchandisers setting prices who need to see gross profit, margin, and markup at once and stop confusing the two percentages.
How the Profit Margin & Markup Calculator works
You enter your unit cost, the cost of goods sold for one item, and your selling price. The tool first calculates gross profit as price minus cost, the absolute money left on each unit after you pay for the product itself. If a product costs 40 and sells for 100, your gross profit is 60 per unit.
Profit margin expresses that gross profit as a percentage of the selling price: margin equals price minus cost, divided by price, times 100. On the same product that is 60 divided by 100, a 60 percent margin. Margin answers the question of how much of each sale dollar you keep, which is why it is the figure used for break-even and contribution analysis.
Markup expresses the same gross profit as a percentage of the cost instead: markup equals price minus cost, divided by cost, times 100. On that product it is 60 divided by 40, a 150 percent markup. This is the crucial distinction the tool makes explicit: margin is profit over price, markup is profit over cost, so the two percentages are always different even though the underlying gross profit is identical.
You can also run it forward from a target. To find the price that delivers a desired margin, divide cost by one minus the margin, so a 40 cost at a target 60 percent margin needs a price of 40 divided by 0.40, which is 100. Pricing from a target margin keeps your contribution margin where it needs to be, which is the same input that drives break-even and break-even ROAS.
The formula
Gross profit = price - cost. Profit margin % = ((price - cost) / price) x 100. Markup % = ((price - cost) / cost) x 100. To set price from a target margin: price = cost / (1 - margin).
Frequently asked questions
What is the difference between margin and markup?+
Margin and markup measure the same gross profit against different bases: margin is profit divided by the selling price, while markup is profit divided by the cost. Because price is larger than cost, the markup percentage is always higher than the margin percentage for the same product. A 50 percent margin, for example, corresponds to a 100 percent markup, so confusing the two will badly distort your pricing if you set price from the wrong one.
Why do margin and markup give different percentages for the same product?+
They share the same numerator, the gross profit, but use different denominators. Margin divides profit by the larger number, price, so it produces a smaller percentage, while markup divides by the smaller number, cost, so it produces a larger one. A product bought at 40 and sold at 100 has 60 of profit, which is a 60 percent margin on price but a 150 percent markup on cost, even though the profit per unit is exactly the same.
How do I set a price to hit a target margin?+
Do not simply add the margin percentage to your cost, because that calculates a markup, not a margin. Instead, divide your cost by one minus the target margin expressed as a decimal: for a 40 cost and a target 50 percent margin, that is 40 divided by 0.50, giving a price of 80. This formula guarantees the resulting margin against price is exactly what you intended, which is why the tool exposes it directly.
Which should I use for pricing decisions, margin or markup?+
Use markup as a quick rule for setting price from cost, but manage your business on margin, because margin is what flows into profitability. Margin tells you the share of each sale you keep to cover overhead, marketing, and profit, which is exactly the input that break-even and contribution-margin analysis require. Many pricing mistakes come from setting a markup that feels healthy but produces a thinner margin than the business actually needs.
Is this gross profit or net profit?+
This calculator measures gross profit and gross margin, which account only for the cost of goods sold against the selling price. It does not subtract operating expenses such as marketing, shipping, payment fees, or overhead, so your net margin will be lower. Gross margin is the right starting point because it sets the ceiling for everything else, and it feeds directly into break-even and break-even ROAS, where those additional costs are layered in.