Profit Margin Calculator

Profit margin and markup are two of the most confused numbers in business, largely because they're calculated from the same raw figures — revenue and cost — but divide by different denominators. Understanding the difference matters because pricing decisions based on the wrong one can quietly erode profitability. Profit itself is simple: revenue minus cost. If you buy a product for £60 and sell it for £100, your profit is £40. The confusion begins when you turn that £40 into a percentage. Margin expresses profit as a share of the selling price (revenue): £40 ÷ £100 = 40% margin. Markup expresses the same £40 profit as a share of what it cost you to acquire or produce the item: £40 ÷ £60 = 66.7% markup. Both numbers are correct, they just answer different questions — margin tells you "what portion of each sale is profit," while markup tells you "how much did I add on top of cost." The practical danger is that these numbers can look deceptively similar at low percentages but diverge sharply as they grow, and business owners who set prices using a rule of thumb like "add a 50% markup" sometimes assume that gives them a 50% margin, when it actually gives them a 33.3% margin (profit of £50 on a cost of £100 gives revenue of £150, and £50 ÷ £150 = 33.3%). This gap widens the higher the intended markup goes, and retailers who don't distinguish the two can end up pricing products lower than they intend, cutting into the margin they thought they'd secured. A worked example: a café buys coffee beans for £8 per kg and blends them into drinks sold for a combined £24 per kg equivalent. Profit is £24 − £8 = £16. Margin is £16 ÷ £24 = 66.7%. Markup is £16 ÷ £8 = 200%. Both describe the exact same £16 of profit, but "200% markup" sounds dramatically larger than "66.7% margin," even though they're the identical pound amount — this is exactly why margin is the number most commonly used in financial reporting and investor communications (it's bounded below 100% for any profitable-but-not-absurd business), while markup is more common in retail pricing conversations (it's a more intuitive way to think about "how much do I add to my cost price"). One important edge case: if revenue is zero, margin is undefined (there's no sale to take a percentage of) — the calculator shows this as a dash rather than a misleading 0% or an error. Similarly, if cost is zero (a purely digital product with no marginal cost, for instance), markup is undefined because you can't calculate "percentage on top of zero." In both cases the underlying profit figure is still shown and still meaningful; only the ratio built on the zero denominator becomes meaningless. The upshot for anyone pricing a product or service: decide up front whether you're targeting a margin or a markup, and be explicit about which one you mean when discussing numbers with colleagues or clients, because the same word "40%" can describe two very different amounts of actual profit depending on which base it's measured against.