— Business & Valuation
Gross Margin Calculator
Calculate gross profit, gross margin, markup, and target price from revenue, cost, or unit economics. See margin versus markup clearly, convert between them, and find the price needed for a target margin.
Gross profit
$40
- Gross margin
- 40%
- Markup
- 66.67%
Try: Margin from price & cost, Price for a 40% margin, 50% markup → 33% margin, COGS breakdown
— Margin ↔ markup conversion reference
| Gross margin | Equivalent markup |
|---|---|
| 10% | 11.11% |
| 15% | 17.65% |
| 20% | 25% |
| 25% | 33.33% |
| 30% | 42.86% |
| 33.33% | 50% |
| 40% | 66.67% |
| 50% | 100% |
| 60% | 150% |
| 66.67% | 200% |
| 75% | 300% |
— Where the sale goes
Download— How it works
Gross profit = Revenue − COGS. Gross margin % = (Revenue − COGS) ÷ Revenue × 100. Markup % = (Revenue − COGS) ÷ COGS × 100. Required price for a target margin = COGS ÷ (1 − margin).
Gross margin, plainly
Gross profit is what’s left of a sale after the direct cost of the goods — revenue minus cost of goods sold. Gross margin expresses that as a percentage of revenue: it’s the slice of every sales dollar available to cover everything else (rent, salaries, marketing) and, eventually, profit. A 40% gross margin means 40 cents of each dollar survives the cost of goods. It’s the cleanest early read on whether a product is viable, and the lever a business watches most closely — a few points of margin can be the difference between profit and loss once fixed costs are paid. The calculator also adds units to turn per-unit figures into totals.
Worked example — revenue 100, COGS 60: Gross profit = 100 − 60 = 40. Gross margin = 40 ÷ 100 = 40%. The same numbers give a markup of 40 ÷ 60 = 66.7% — a bigger number for the identical deal.
Margin vs markup — the confusion that costs money
This is the mistake that quietly erodes pricing across whole businesses. Margin and markup measure the same gross profit against different bases: margin divides it by the selling price, markup divides it by the cost. Because the cost is smaller than the price, the markup percentage is always the larger number — and the gap widens fast. A 50% markup is only a 33% margin; a 100% markup is a 50% margin. So if a supplier says “we work on 30%” and you assume that’s margin when they mean markup, you’ll price too low and wonder where the profit went. The calculator always shows both figures for the same numbers, and the conversion table below maps common margins to their markup equivalents — keep it handy whenever you set prices.
Pricing from a target margin
Run the calculator backwards and it becomes a pricing tool. Tell it your cost and the margin you want, and it returns the selling price that delivers it — price = cost ÷ (1 − margin). This is the right way to price to a margin: dividing by one minus the margin, not simply adding the margin percentage to the cost (which would give you a markup, and a lower margin than intended). You can target a markup instead if that’s how your trade quotes. Break the cost into materials, labour and overhead to see where it comes from, or list several products to get each one’s margin and a blended total. Educational tool only — not financial advice; gross margin covers only direct costs, so a healthy gross margin still has to carry all the operating expenses beneath it.
— Reader questions
What is the difference between margin and markup?
Both measure gross profit, but against different bases. Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. Since cost is lower than price, the markup percentage is always higher for the same deal — a 50% markup equals a 33% margin, and a 100% markup equals a 50% margin. Confusing the two leads to systematic underpricing.
How do I calculate gross margin?
Subtract the cost of goods sold from revenue to get gross profit, then divide by revenue and multiply by 100. For example, revenue of 100 and COGS of 60 gives a gross profit of 40 and a gross margin of 40%. The same gross profit divided by the cost (60) gives the markup, 66.7%.
How do I price a product to a target margin?
Divide the cost by one minus the target margin (as a decimal): price = cost ÷ (1 − margin). For a 40% margin on a 60 cost, that’s 60 ÷ 0.6 = 100. Don’t just add 40% to the cost — that’s a markup and produces only a 28.6% margin, less than you intended.
Is gross margin the same as profit margin?
No. Gross margin only accounts for the direct cost of goods sold; it’s the profit before operating expenses, interest and tax. Net (or profit) margin is what remains after all of those. A business can have a high gross margin and still lose money if its operating costs are too large, so gross margin is a starting point, not the whole picture.
Can gross margin be over 100%?
No — gross margin maxes out just below 100%, because gross profit can never exceed revenue (you can’t keep more than the whole sale). Markup, by contrast, has no upper limit: a product costing 10 and selling for 50 has an 80% margin but a 400% markup. That asymmetry is exactly why the two measures get confused.