Want to know if your prices are really set for profit? Our Price Margin Calculator does the math instantly. Just enter your costs and selling price to see your gross and net margins in seconds — no spreadsheets, no guesswork, just the clarity you need to price smarter and grow your business.
How to use our Price Margin Calculator
Using the tool is straightforward:
- Enter your cost of goods sold (COGS).
- Input your selling price.
- (Optional) Add additional expenses if you want to see your net margin.
- Get instant results for both gross margin and net margin.
This calculator saves you time and eliminates manual math errors, helping you make smarter pricing decisions.
How do you calculate price margin?
Price margin measures how much profit you make as a percentage of your selling price.
Formula:
Price Margin = (Selling Price – Cost Price) ÷ Selling Price × 100
Example:
- Cost price: $40
- Selling price: $100
- Price margin = (100 – 40) ÷ 100 × 100 = 60%
This means 60% of your selling price is profit margin, while 40% covers your costs.
Price Margin vs Profit Margin
Many entrepreneurs confuse price margin with profit margin. They’re related but not the same.
- Price margin: Focuses on the relationship between cost price and selling price.
- Profit margin: Factors in all business expenses — such as rent, salaries, taxes, and marketing — to reveal your true profitability.
For example, if you sell a shirt for $50 that costs you $25, your price margin is 50%. But if you also spend $15 per shirt on overheads and marketing, your net profit margin is much lower.
How to Determine Profit Margin
Profit margin shows the percentage of revenue that turns into actual profit after expenses. It’s a key indicator of financial health.
Steps to calculate profit margin manually:
- Subtract total expenses from total revenue to find net income.
- Divide net income by total revenue.
- Multiply by 100 to get a percentage.
Formula:
Profit Margin = (Net Income ÷ Revenue) × 100
Our calculator handles these steps instantly, giving you fast results without manual number-crunching.
What is the Profit Margin Formula?
There are two main versions:
- Gross Profit Margin Formula:
(Revenue – Cost of Goods Sold) ÷ Revenue × 100 - Net Profit Margin Formula:
(Net Income ÷ Revenue) × 100
These formulas provide different perspectives. Gross margin shows efficiency in production, while net margin reveals overall profitability after all expenses.
For more detail, see Profit margin on Wikipedia.
What is a reasonable profit margin for a small business?
There’s no single “correct” profit margin, as it varies by industry. However, some benchmarks include:
- Retail: 2–5% net margin.
- Restaurants: 3–6% net margin.
- Service businesses: 15–30% net margin.
- Software/tech companies: Often 20%+ margins due to low operating costs.
For small businesses, achieving even a modest margin can ensure sustainability and growth.
Gross Margin Calculator
Gross margin looks only at revenue and direct costs (COGS). It’s useful for understanding how efficiently you’re producing and pricing products.
Example:
- Revenue: $10,000
- COGS: $6,000
- Gross margin = (10,000 – 6,000) ÷ 10,000 × 100 = 40%
Our calculator automatically provides gross margin, helping you identify whether you need to adjust your pricing or sourcing costs.
Net Margin Calculator
Net margin accounts for all expenses, not just production. This includes rent, salaries, utilities, marketing, and taxes.
Example:
- Revenue: $10,000
- Net income after expenses: $1,500
- Net margin = (1,500 ÷ 10,000) × 100 = 15%
The net margin is the clearest picture of profitability, and our calculator makes it simple to evaluate.
Why margins matter for business success
Margins aren’t just numbers on a spreadsheet — they’re the foundation of your business model. Healthy margins mean:
- Flexibility to reinvest in growth.
- Stability when costs rise unexpectedly.
- Pricing power in competitive markets.
- A clear path to long-term profitability.
Without understanding your margins, even high sales volume can lead to financial loss.