How it works
Profit (selling price minus cost) is divided by the selling price, then multiplied by 100.
Take a cost of 60 and a selling price of 90. Profit is 90 − 60 = 30. Divide by the selling price: 30 ÷ 90 = 0.333333... Multiply by 100 and the margin is 33.3333333333%. Results are cleaned to 12 significant digits and shown to at most 10 decimal places, so a margin that does not terminate stops there rather than carrying on; treat those trailing digits as an approximation, not a measured quantity. The markup and margin guide sets the two conventions side by side.
The same 30 of profit can be described in two ways. Divided by the cost of 60 it is a 50% markup; divided by the selling price of 90 it is a 33.3333333333% margin. Whenever there is a profit the selling price is the larger of the two figures, and dividing by a larger number gives a smaller percentage, so margin is always the lower of the pair. The Markup Calculator runs the cost-based version, starting from the cost and the markup you want.
Formula: Profit margin = (selling price − cost) ÷ selling price × 100
Examples
The same sale as the Markup example
A cost of 100 sold for 130 (a 30% markup) has a margin of (130 − 100) ÷ 130 × 100 ≈ 23.1%, not 30%.
Selling below cost
A cost of 249.50 with a selling price of 200 gives a profit of −49.50, so the margin is (−49.50 ÷ 200) × 100 = −24.75%. A negative result is the correct reading of a sale that recovers less than the item cost, and its size is measured against the selling price rather than the cost.
The largest margin a sale can have
With a cost of zero and a selling price of 40, the whole 40 is profit, so the margin is (40 − 0) ÷ 40 × 100 = 100%. The cost may be zero but never negative, so 100% is the ceiling: no sale of a non-negative cost produces more.
Common uses
- Pricing work or goods: deciding whether a quoted selling price leaves enough margin to cover overheads, time and risk.
- Checking a sale: confirming that a reduced price still clears a minimum margin, once the new price has come from the Discount Calculator.
- Sanity-checking a margin quoted by a supplier, a competitor or in a set of accounts against figures you already know.
Things to keep in mind
- Margin and markup are not the same calculation: margin divides profit by the selling price, markup divides the identical profit by the cost instead. See the Markup Calculator for that version.
- A selling price below cost gives a negative margin, meaning a loss — this is a meaningful, correct result, not an error.
- The selling price cannot be zero.
- A cost of zero is accepted and returns a margin of 100%, since every pound taken is profit.
- Both figures are read as amounts in the same units. The calculator performs no currency conversion and applies no rate of tax.
- A margin says nothing about how long the money is tied up. A high margin on a slow-moving item can be worth less than a lower margin that turns over quickly.