Profit Margin Calculator
| Margin % | Markup % | Multiplier |
|---|---|---|
| 20% | 25% | 1.25x |
| 33% | 50% | 1.50x |
| 40% | 67% | 1.67x |
| 50% | 100% | 2.00x |
| 60% | 150% | 2.50x |
| 70% | 233% | 3.33x |
| 80% | 400% | 5.00x |
What is profit margin? Profit margin is the percentage of revenue left after subtracting cost. The most common version — gross profit margin — subtracts only cost of goods sold (COGS) from revenue. A product that sells for $65 with $18 COGS has a gross margin of 72.3%. Simple in formula but commonly confused with markup, which gives a very different number for the same product.
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of cost. That same $65 product with $18 COGS has a 72% margin but a 261% markup. The reference table on this page shows the conversion between margin and markup at common levels so you never confuse the two in conversations with suppliers, investors, or your finance team.
Gross margin is a useful starting point but it dramatically overstates actual profitability for ecommerce businesses. It ignores shipping costs, payment processing fees, advertising costs per order, and returns — all of which reduce real per-order profit significantly. A brand reporting 70% gross margins might have only 20% contribution margin once all variable costs are included. For a more complete picture, use this alongside the Contribution Margin calculator.
Healthy gross margins vary by category: apparel typically runs 50 to 70%, beauty and supplements 70 to 85%, electronics 15 to 35%, and food and beverage 40 to 60%. If your gross margin is below your category average, your sourcing, manufacturing, or pricing needs attention before you can scale advertising profitably.