Profit Margin Calculator
Calculate gross margin, net margin, and markup. Or work backwards from a desired margin to find your selling price.
Calculation mode
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For net margin calculation
Frequently asked questions
What is profit margin?▾
Profit margin is the percentage of revenue that remains as profit after costs are deducted. Gross margin considers only direct costs (cost of goods sold), while net margin also subtracts overheads like rent, salaries, and utilities.
What is the difference between margin and markup?▾
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 for £60 and sell for £100, the margin is 40% but the markup is 66.7%.
What is a good profit margin for a UK business?▾
It varies by industry. Retail typically sees 2-5% net margin, professional services 15-40%, construction 5-10%, and software/SaaS 20-40%. The UK average across all industries is roughly 10-15% net profit margin.
How do I calculate selling price from a desired margin?▾
Divide your cost by (1 minus the desired margin as a decimal). For example, if your cost is £60 and you want a 40% margin: £60 / (1 - 0.40) = £100 selling price.
What is gross profit vs net profit?▾
Gross profit is revenue minus direct costs (materials, labour). Net profit is gross profit minus all overheads (rent, utilities, admin, marketing). Net profit is the true bottom line of your business.
Does VAT affect profit margin?▾
If you are VAT registered, you should calculate margins on VAT-exclusive figures. VAT is collected on behalf of HMRC and is not your revenue. If you are not VAT registered, your costs may include irrecoverable VAT.
How can I improve my profit margin?▾
You can improve margins by: increasing prices, reducing cost of goods (better suppliers, bulk buying), cutting overheads, improving efficiency, focusing on higher-margin products, or reducing waste and returns.
What is a break-even margin?▾
Break-even is when your total revenue exactly covers all costs (both direct and overheads), resulting in a net margin of 0%. Any sales above the break-even point generate profit.
Should I use margin or markup for pricing?▾
Both work, but margin is more commonly used in financial reporting and by investors. Markup is often used in retail and wholesale pricing. The key is to be consistent and know which one you are using.
How do I calculate margin for a service business?▾
For services, your direct costs are typically labour (time spent). Calculate your hourly cost (salary + employer NI + pension), multiply by hours on the project, then compare to the price charged. Overheads include office costs, software, insurance etc.