Profit Margin Calculator
Calculate profit margin and markup from revenue and cost. Understand the difference between margin and markup with clear explanations
Gross Profit
£0.00
Profit Margin
0.00%
Markup
0.00%
Cost as % of Revenue
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Detailed Breakdown
Understanding Margin vs Markup
Profit Margin
Profit divided by revenue. Shows what percentage of each pound of revenue is profit.
Markup
Profit divided by cost. Shows how much you've added to your cost to reach the selling price.
Key Difference
Markup is always higher than margin because profit is divided by a smaller number (cost vs revenue). A 50% markup ≠ 50% margin.
Three Types of Profit Margin
Gross margin: (Revenue - COGS) / Revenue × 100. Operating margin: (Revenue - COGS - Operating Expenses) / Revenue × 100. Net margin: (Revenue - All Costs) / Revenue × 100. Net margin is the bottom line - the profit you actually keep after everything. Each step accounts for more costs.
Healthy margin ranges by industry: software/SaaS 70-85% gross, 20-30% net. Retail 20-50% gross, 2-5% net. Restaurants 60-70% gross on food, 3-5% net. Manufacturing 25-40% gross, 8-15% net. Net margin under 5% is tight; over 15% is excellent. These are rough industry averages; individual companies vary widely.
Profit Margin Reference
| Industry | Typical Gross | Typical Net |
|---|---|---|
| Software/SaaS | 70-85% | 20-30% |
| Pharmaceutical | 70-90% | 15-25% |
| Manufacturing | 25-40% | 8-15% |
| Restaurants | 60-70% | 3-5% |
| Grocery retail | 20-30% | 1-3% |
| E-commerce | 30-50% | 5-10% |
| Construction | 15-25% | 3-7% |
| Professional services | 50-70% | 10-20% |
Frequently Asked Questions
What's a 'good' profit margin?
Depends on industry. Software 25%+ net is good. Retail 5%+ net is good. Construction 7%+ net is good. Compare to industry benchmarks, not absolute thresholds. A 5% net margin in software might signal trouble; a 5% net margin in groceries is genuinely competitive.
Why isn't margin = markup?
Mathematical: markup uses cost as base; margin uses selling price as base. Same dollars, different denominator. 100% markup = 50% margin. Always check which one a business is quoting before comparing across companies.
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