Profit Margin Calculator

Work out your profit margin

Use figures that exclude VAT on both sides.

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Profit—
Margin—
Markup—
Cost—
Revenue—

CostProfit

The working out is shown here once the calculator has enough information.

Compare three products at once

Pricing decisions are usually made across a range rather than one line. Fill in as many rows as you need.

Product A

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Profit—
Margin—
Markup—
Cost—
Revenue—

CostProfit

The working out is shown here once the calculator has enough information.

Product B

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Profit—
Margin—
Markup—
Cost—
Revenue—

CostProfit

The working out is shown here once the calculator has enough information.

Product C

Fill in the fields above and the answer appears here.

Profit—
Margin—
Markup—
Cost—
Revenue—

CostProfit

The working out is shown here once the calculator has enough information.

How is profit margin calculated?

Take the selling price, take the cost away, divide what is left by the selling price. A candle costing £3.20 that sells for £8.00 leaves £4.80. Divide £4.80 by £8.00 and you get 0.6, so the margin is 60%.

The order matters more than it looks. Divide by the cost instead and you get 150%, which is the markup on that same candle. Both are correct and both describe the same £4.80, so quoting one when your supplier means the other moves your price by a long way.

Why revenue goes on the bottom

Margin answers the question your accountant asks. Out of everything that came in, how much stayed? That framing makes margins comparable across different products and it caps the figure at 100%. A candle cannot have a 150% margin no matter what it sells for.

What belongs in the cost box

Everything that only exists because the sale happened. For that candle: wax, wick, jar, label, the carriage in from the supplier, the postage out, the payment fee. Rent and your own salary stay out of it. They belong further down, in the operating margin.

Worked examples from three UK trades

TradeCostPriceProfitMarginMarkup
Independent bookshop, hardback£12.60£22.00£9.4042.73%74.60%
Café, flat white£0.58£3.40£2.8282.94%486.21%
Electrical wholesaler, cable drum£184.00£229.00£45.0019.65%24.46%

The café looks like the best business until you remember that the coffee has to cover a lease, two staff and a machine. That is why the net profit margin matters as much as this one. The wholesaler's 19.65% looks thin, but it moves on volume and holds almost no overhead per unit.

Profit margin questions

What is the profit margin formula?
Profit margin % = ((Revenue − Cost) ÷ Revenue) × 100. Revenue is the denominator, which separates margin from markup, where cost sits underneath instead.
What profit margin should a small UK business aim for?
Retail commonly runs a 25% to 45% gross margin, hospitality 60% to 70% on drinks and far less on food, professional services 50% and above. Net margin after every cost is usually a single-digit or low double-digit figure in all three.
How do I raise my profit margin without raising prices?
Cut what sits in the cost box. Renegotiate carriage, buy in larger drops where storage allows, cut card processing fees, and stop discounting lines that already run thin. A 2% cost reduction on a 30% margin adds roughly 1.4 points of margin.
Can profit margin be negative?
Yes. If the cost exceeds the price, the calculator returns a negative profit and a negative margin. That is normal for loss leaders and clearance stock, and a warning sign anywhere else.
Does profit margin include VAT?
It should not. Work with figures that exclude VAT on both sides. The homepage calculator has a VAT section that removes the tax for you if all you have is the shelf price.

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