Margin & Markup Calculator

Calculate profit margins, markup percentages, and optimal selling prices for products and services.

Free business profit calculator.

Calculator

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Results

Contribution Margin (per unit)
$0.00
Contribution Margin Ratio
0.0%
Net Profit (per unit)
$0.00
Net Profit Margin
0.0%
Markup Percentage
0.0%
Margin from Markup (Conversion)
0.0%
Markup from Margin (Conversion)
0.0%

Margin Comparison

Contribution Margin Ratio$0.00
Net Profit Margin$0.00

What is Contribution Margin?

Contribution margin is the amount each unit sale contributes to covering fixed costs and generating profit.

Formula: Revenue - Variable Costs (per unit).

Example: Sell for $100, variable cost $30 = $70 contribution margin.

That $70 goes toward paying rent, salaries, and overhead.

After fixed costs are covered, contribution margin becomes pure profit—critical for break-even analysis and scaling decisions.

Contribution Margin vs Profit Margin

KEY DIFFERENCE: Contribution margin excludes fixed costs, profit margin includes ALL costs.

Example: Sell for $100, variable cost $30, fixed cost $20.

Contribution margin = $70 (70%).

Profit margin = $50 (50%).

Use contribution margin for:
- Pricing decisions and minimum viable price
- Break-even analysis
- Ranking products by how much they cover fixed costs

Use profit margin for:
- Overall profitability and financial reporting
- Investor presentations and valuation work
- Comparing your business to competitors

What is Profit Margin?

Profit margin measures profit as a percentage of the selling price (revenue).

Formula: (Revenue - Total Cost) / Revenue × 100.

Example: Sell for $100 with $60 total cost.

Profit margin = ($100 - $60) / $100 = 40%.

Margin is the standard profitability metric used by accountants, lenders, and investors.

What is Markup?

Markup measures profit as a percentage of cost rather than revenue.

Formula: (Revenue - Cost) / Cost × 100.

Example: Sell for $100 with $60 cost.

Markup = ($100 - $60) / $60 = 66.7%.

Markup is popular for retailers and resellers because it keeps the math focused on cost when setting a selling price.

Why Margin and Markup Are Different

A 50% margin does NOT equal a 50% markup—they use different denominators.

Margin looks at profit ÷ revenue.

Markup looks at profit ÷ cost.

Example: $50 cost → $100 revenue = $50 profit.

- Margin = $50 / $100 = 50%

- Markup = $50 / $50 = 100%

Same $50 profit, two very different percentages.

Common Pricing Mistake

❌ WRONG: "I want 40% margin, so I add 40% to my $50 cost = $70." That only gives a 28.6% margin.

✅ CORRECT: Use Cost / (1 - Margin%).

For 40% margin: $50 / (1 - 0.40) = $83.33.

Profit = $83.33 - $50 = $33.33, which is exactly 40% of the selling price.

When to Use Contribution Margin

Use contribution margin when you need to understand how much each sale covers overhead:

- Break-even analysis: How many units until you profit?

- Pricing decisions: Does your price comfortably exceed variable costs?

- Scaling analysis: Higher contribution margin % products scale faster.

- Product comparison: Which products fund fixed expenses?

- Make-or-buy decisions and special pricing: Know your minimum acceptable price (must exceed variable cost).

Industry Margin Benchmarks

Typical net profit margins:
- Grocery stores: 1-3%
- Restaurants: 3-5%
- Retail clothing: 4-13%
- Software (SaaS): 70-90%
- Jewelry: 25-75%
- Furniture: 30-50%
- Construction: 10-20%
- Consulting: 50-70%

Compare your numbers to industry benchmarks to ensure competitive pricing while staying profitable.

Margin to Markup Conversion

Need to switch between margin and markup?
- 20% margin ≈ 25% markup
- 25% margin ≈ 33% markup
- 30% margin ≈ 43% markup
- 40% margin ≈ 67% markup
- 50% margin = 100% markup
- 60% margin ≈ 150% markup
- 75% margin ≈ 300% markup

Formula: Markup = Margin / (100 - Margin) × 100.

Cost-Plus Pricing Strategy

Cost-plus pricing adds a fixed markup to your cost.

Example: $50 cost + 100% markup = $100 price.

Pros: Fast, simple, ensures costs are covered.

Cons: Ignores competitor pricing and customer willingness to pay, so you might leave profit on the table.

Works best for commodities, wholesale orders, or cost-plus contracts.

Don't Forget Operating Expenses

Gross margin only covers direct product costs (COGS).

You still need to pay rent, salaries, utilities, marketing, software, and taxes.

Always calculate net margin: Gross Profit - Operating Expenses.

A 60% gross margin can shrink to 10% after $50K/month in overhead.

Price with your full cost structure in mind.

Understanding Margin Trading: Leverage, Risk, and Returns

Margin trading allows investors to borrow funds from their brokerage to purchase securities, amplifying both potential returns and potential losses through financial leverage.

When you buy stocks on margin, you're essentially using your existing portfolio as collateral to borrow additional capital, typically up to 50% of the purchase price for most stocks (as regulated by Federal Reserve Regulation T).

While this leverage can magnify profits—a 10% gain on a stock purchased with 50% margin becomes a 20% return on your invested capital—it equally magnifies losses, and comes with significant risks that many novice investors underestimate.

The mechanics of margin involve several critical concepts: the initial margin requirement (typically 50%), which determines how much you can borrow; the maintenance margin (usually 25-30%), which is the minimum equity percentage you must maintain; and margin calls, which occur when your equity falls below the maintenance requirement, forcing you to either deposit additional funds or have securities sold to cover the shortfall.

Perhaps the most dangerous aspect of margin is that losses can exceed your initial investment—if a stock purchased with 50% margin declines by 50%, you've lost your entire equity contribution while still owing the full loan amount plus interest.

Margin interest rates, typically ranging from 6-12% annually depending on the borrowed amount and brokerage, add ongoing costs that erode returns and create a hurdle rate your investments must exceed to remain profitable.

Professional traders use margin judiciously as a short-term tactical tool, maintaining significant unused margin capacity as a buffer and closely monitoring positions to avoid margin calls.

In contrast, retail investors often misuse margin by remaining continuously leveraged, failing to account for margin interest, and holding leveraged positions through volatile periods where even temporary price swings can trigger devastating margin calls.

The 2008 financial crisis and the 2020 GameStop volatility demonstrated how margin amplifies market stress—investors forced to sell during market declines due to margin calls create downward spirals that accelerate losses.

Before using margin, investors should have substantial trading experience, maintain emergency liquidity for potential margin calls, and understand that leverage is a double-edged sword that demands respect, discipline, and rigorous risk management.

Frequently Asked Questions

Common questions about the Margin & Markup Calculator

Profit margin is the percentage of revenue that exceeds the costs of goods sold. It shows how much money your business keeps from sales after covering expenses.

Margin Trading and Retail Investor Risk

Academic research on how retail investors use margin and the risks associated with leveraged trading, including behavioral patterns that lead to losses.

⚠️ Margin Trading and Retail Investor Risk

Margin Requirements and Regulations

FINRA guidance on margin account rules, including initial and maintenance requirements, margin call procedures, and investor protections.

Risks of Margin Debt in Market Downturns

SEC investor bulletin explaining the specific risks of margin trading, including how margin calls can force liquidation during market volatility.

⚠️ Risks of Margin Debt in Market Downturns