Profit Margin Calculator
Net Profit
Markup Percentage
Profit Margin
Beyond Revenue: The Importance of Profit Margin
High sales figures can be misleading. A business that generates millions in revenue might still be unprofitable if its costs are too high. This is where the profit margin comes in. It's the ultimate metric for a company's financial health, telling you exactly what percentage of each dollar in sales you actually keep as profit.
This calculator moves beyond simple profit-and-loss to give you two critical percentages: **Profit Margin** and **Markup**. Understanding these numbers allows you to make smarter pricing decisions, control costs more effectively, and build a truly sustainable and profitable business.
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Frequently Asked Questions (FAQ)
What is Profit Margin?
Profit Margin is a ratio of profitability, calculated as Net Profit divided by Revenue, and expressed as a percentage. It shows how many cents of profit the business has generated for each dollar of sale. A higher profit margin is generally better.
What's the difference between Margin and Markup?
They both measure profit, but from different perspectives. Margin is profit as a percentage of the selling price (Revenue). Markup is profit as a percentage of the cost. For example, if you buy a product for $50 and sell it for $100, your profit is $50. Your Markup is 100% ($50 profit / $50 cost), but your Margin is 50% ($50 profit / $100 revenue).
What is a good profit margin?
A "good" profit margin varies significantly by industry. A 10% net profit margin is often considered average, while 20% is considered high, and 5% is low. Retail and grocery stores often operate on very low margins (1-5%), while software companies and luxury brands can have very high margins (50%+).