Profit margin calculator
This margin calculator gives your gross profit margin from cost and price, the price for the margin you want, and the return your ads need to break even.
- Choose what to work out
- Fill in the two figures you know
- Read the profit, markup and the ROAS your ads need
Example figures. Put in yours.
Your gross margin Selling price Most you can pay
- Profit on each
- –
- Margin
- –
- Markup
- –
- Break-even ROAS
- –
The calculator needs JavaScript. The formula is below if you would rather work it out by hand.
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This profit margin calculator works out your gross margin from what something costs and what you sell it for. Switch it round and it gives the price you need for the margin you want, or the most you can pay for stock to hold a margin at your price.
It also shows the markup, the profit on each sale and the return on ad spend your ads must beat. If your price includes VAT, say so under More options and it takes the VAT out first.
How to calculate profit margin (the margin formula)
Take the cost away from the selling price, then divide by the selling price.
| To find | Formula | Example |
|---|---|---|
| Margin | (Price − cost) ÷ price × 100 | (€60 − €40) ÷ €60 × 100 = 33.3% |
| Selling price | Cost ÷ (1 − margin) | €40 ÷ 0.6 = €66.67 for 40% |
| Cost | Price × (1 − margin) | €60 × 0.6 = €36 for 40% |
How do I calculate a 30% margin?
Divide the cost by 0.7. Something that costs €70 has to sell for €100 to make a 30% margin.
The trap is adding 30% to the cost instead. That gives €91, and €21 of profit on €91 is only a 23.1% margin. It feels like the same thing. It isn’t, and across a year of sales the gap adds up.
Our guide to markup vs margin has a chart that converts one to the other.
A margin calculator for the UK and Ireland, with VAT
The formula is the same everywhere. What catches people out is VAT. Margin is worked out on the price before VAT, because the VAT belongs to the Revenue Commissioners or HMRC, not to you.
If your price includes VAT, divide by 1.23 for the Irish standard rate, 1.135 for the 13.5% rate, or 1.2 for UK VAT before you start. Or pick the rate under More options and the calculator does it, with the working shown.
Gross vs net profit margin
Gross margin counts only the cost of the goods or the job. Net margin counts everything: rent, wages, software, advertising, tax.
This calculator works out gross margin. It’s the one you price with, and the one that sets how much you can spend to win a customer. Net margin is what’s left once the rest of the business is paid for.
What your margin means for advertising
Your gross margin sets the return on ad spend you need just to cover the ads. The sum is 1 ÷ margin. At a 40% margin the ads break even at a ROAS of 2.5; at 20% they need 5.
That’s why two shops can run the same campaign with the same results and one makes money while the other loses it. The table in the calculator shows the break-even ROAS for each margin, and the ROAS calculator checks a real campaign against yours.
How to improve your margin
There are only three levers. Charge more, pay less, or sell more of the things that already carry a better margin.
The first is usually the least used. A small price rise on a product people already buy often does more than any cost saving, and the calculator shows exactly what it does to the margin before you commit. The markup calculator helps if your suppliers talk in markups.
A website is judged by what it converts, not by what it wins.
Client results, measured in the numbers the business cares about.
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Questions people ask.
How do you calculate profit margin?
Take the cost away from the selling price, divide by the selling price and multiply by 100. A product that costs €40 and sells for €60 makes €20, and €20 ÷ €60 is a margin of 33.3%.
How to calculate profit margin in the UK?
With the same formula, on the price before VAT, because the VAT isn't yours. If your price includes VAT at 20%, divide it by 1.2 first, or tell the calculator under More options and it does it for you. In Ireland, divide by 1.23 at the standard rate.
How do I calculate a 30% margin?
Divide the cost by 0.7 (one minus the margin). Something that costs €70 needs to sell for €100 to make a 30% margin. Adding 30% to the cost gives €91, which is only a 23.1% margin.
Is a 40% profit margin high?
It depends whether it is gross or net, and what it has to cover. A 40% gross margin still has to pay for overheads and marketing before anything is left; the same 40% after every cost would be a very different business. For advertising, a 40% margin breaks even at a return on ad spend of 2.5, which the ROAS calculator works through.
What is the difference between gross and net profit margin?
Gross margin counts only the cost of the goods or the job. Net margin counts everything: rent, wages, software, advertising, tax. This calculator works out gross margin, the figure you price with and the one that decides your break-even return on ad spend.
Should I price with margin or markup?
Start from the margin you need, because that is what pays the bills, then work back to the price. Choose "Selling price" above, enter your cost and the margin you want, and the calculator gives the price and the markup that goes with it.
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- Google Ads budget calculator Start from the enquiries you want and get the monthly budget that buys them, then what those enquiries are worth once they become customers.
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- CTR calculator Click-through rate from clicks and impressions, set against the published average for your industry, or two ads compared to see which really wins.
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