Profit Margin Calculator
Work out gross margin, net margin, markup and the price you need for a target margin.
Use amounts for one product, one order or one period — just keep them consistent. Leave GST/HST/QST out of revenue: sales tax you collect is owed to the government, not income.
Revenue and cost of goods are enough to see your gross margin.
A margin is only as good as the costs behind it. BankDeMark Command keeps your income and expenses and builds a profit-and-loss report from them — free to start.
How to calculate profit margin
Profit margin is the share of each sale you keep after costs. Subtract costs from revenue, divide by revenue, and multiply by 100. If you sell something for $100 and it cost you $60, your gross margin is 40%.
The formulas this calculator uses
| Measure | Formula | Tells you |
|---|---|---|
| Gross profit | Revenue − cost of goods sold | What is left to pay overhead |
| Gross margin | Gross profit ÷ revenue × 100 | How much of each sale covers overhead and profit |
| Markup | Gross profit ÷ cost × 100 | How far price sits above cost |
| Net margin | (Revenue − COGS − operating expenses) ÷ revenue × 100 | What the business keeps before income tax |
| Price for a target margin | Cost ÷ (1 − target margin) | The price that hits the margin you want |
Worked example: a small online shop
A shop sells $10,000 of products in a month (before GST/HST). The products cost $6,000, and rent, software and advertising come to $2,500.
- Gross profit: $10,000 − $6,000 = $4,000
- Gross margin: $4,000 ÷ $10,000 = 40%
- Markup: $4,000 ÷ $6,000 = 66.7%
- Net profit: $4,000 − $2,500 = $1,500, a 15% net margin
- To reach a 50% gross margin on the same costs, sales would need to be $6,000 ÷ 0.5 = $12,000
These figures are illustrative; enter your own numbers above.
Margin vs markup: why they get confused
Margin is measured against the price; markup is measured against the cost. Adding 50% to a $60 cost gives a $90 price — but only a 33.3% margin. If you plan in margins, set prices with the target-margin formula rather than by adding a percentage to cost. Our guide to pricing for profit goes further.
Canada and the US: leave sales tax out
Canada:GST, HST or QST you charge is collected on behalf of the government and remitted, so it is not revenue. Calculate margins on pre-tax amounts. Input tax credits on your costs work the same way — use costs before recoverable tax. See the CRA's GST/HST for businesses and when to register and charge GST/HST.
United States: state and local sales tax you collect is likewise owed to the taxing authority, not income. Rules and rates vary by state, so check your state revenue department.
From one calculation to real numbers
A calculator answers “what if”. To know your actual margin month by month you need your real income and expenses in one place. BankDeMark Command records them (including bank CSV imports) and builds a profit-and-loss report and GST/HST totals from them — free to start. If you only need to bill clients, BankDeMark Invoice is the simpler fit.
Related: the financial metrics every online business should track and the budget calculator.
Profit margin calculator FAQ
How do you calculate profit margin?
Subtract costs from revenue, then divide by revenue and multiply by 100. Gross margin uses only the cost of goods sold: (revenue − COGS) ÷ revenue × 100. Net margin also subtracts operating expenses: (revenue − COGS − expenses) ÷ revenue × 100.
What is the difference between margin and markup?
Both use the same profit, but margin divides it by the selling price and markup divides it by the cost. A product that costs $60 and sells for $100 has a $40 profit: a 40% margin and a 66.7% markup. Markup is always the larger number when there is a profit.
What price do I need for a 50% margin?
Divide your cost by (1 − the target margin). For a $60 cost and a 50% margin: $60 ÷ 0.5 = $120. Adding 50% to cost ($90) only gives a 33.3% margin, which is the most common pricing mistake.
Should GST/HST be included in revenue?
No. Sales tax you collect from customers is held for the government and remitted, so including it overstates revenue and margin. If you are not registered for GST/HST (for example, under the small-supplier threshold), you do not charge it in the first place.
What is a good profit margin for a small business?
It depends heavily on the industry — a grocery store and a software business have very different typical margins — so there is no single good number. Compare against your own past results and against published figures for your industry rather than a rule of thumb.
Is net margin the same as profit after tax?
Not in this calculator. Net margin here is before income tax. Your actual after-tax profit depends on your business structure and tax situation; ask an accountant for that figure.
Disclaimer
This content is educational only and is not personalized financial, investment, tax, legal, or credit advice. Tax rules and contribution limits change annually — confirm current figures with the relevant tax authority before acting. Consider consulting a qualified professional licensed in your jurisdiction before acting on anything you read here.
Read our editorial standards for how this content is sourced and corrected, or the full financial disclaimer.
Last reviewed: 2026-11-14
