What is the difference between margin and markup?

Margin is profit divided by revenue. Markup is profit divided by cost. Example: Cost $10, Sell $15. Margin = $5/$15 = 33.3%. Markup = $5/$10 = 50%. They look at the same profit from different angles. Retailers typically discuss markup; investors and accountants typically discuss margin. This calculator shows both simultaneously.

What profit margin should a small business aim for?

Target margins vary by industry: Retail and e-commerce: 10–30% net margin. Service businesses: 30–50% net margin. Amazon FBA: 20–30% net margin after all fees is considered healthy. Below 10% net margin, you have very little buffer for unexpected costs, returns, or price increases from suppliers.

How do I improve my profit margin as an online seller?

Four main levers: (1) Raise prices — even 5–10% more can significantly improve margin if conversion stays steady. (2) Reduce COGS — negotiate with suppliers, improve order quantity, or find alternative sources. (3) Optimize packaging — hitting a lower FBA size tier saves $1–5 per unit. (4) Reduce ad waste — improve ACoS by pausing low-converting keywords and targeting more specific terms.

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Profit Margin Calculator

Calculate gross profit margin, net margin, and markup — and understand the difference between them

The Profit Margin Calculator helps small business owners and online sellers quickly find their gross margin, net margin, and markup percentage from revenue and cost. Many sellers confuse margin and markup — this calculator calculates both simultaneously and explains which metric matters for which decision. Use it alongside the Amazon FBA Calculator for a complete picture of your unit economics.

Profit Margin CalculatorStrong margin

Revenue / selling price ($)Cost / COGS ($)

Gross profit+$18.00

losshealthy ≥15%

Revenue$50.00

Cost (COGS)-$32.00

Gross profit$18.00

Gross margin36.0%

Markup56.3%

Margin vs. Markup: A 56% markup equals a 36.0% margin. They measure the same profit from different angles — margin uses revenue as the base, markup uses cost.

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Understanding your profit margin is fundamental to running a sustainable business. Here's how to use this calculator and interpret the results.

Step 1 — Enter revenue (selling price)

Enter the price the customer pays. For Amazon sellers, this is your sale price before Amazon deducts its fees. To calculate net margin after platform fees, use the Amazon FBA Calculator instead — it handles the fee deductions automatically.

Step 2 — Enter cost (COGS)

For product-based businesses: enter your total cost of goods sold per unit — product cost + shipping + packaging. For service businesses: enter your direct cost to deliver the service (labor, materials, tools). Do not include overhead expenses like software subscriptions for gross margin; include them for net margin.

Step 3 — Read gross margin vs. net margin

Gross margin only accounts for direct costs. Net margin also subtracts overhead. For a quick sanity check on a product, gross margin is fine. For business planning and investor conversations, net margin is the number that matters.

Step 4 — Understand the margin vs. markup difference

Margin is calculated on revenue. Markup is calculated on cost. A 100% markup (doubling your cost) equals a 50% margin — not a 100% margin. This distinction matters when communicating with accountants, investors, or wholesale buyers who may use different terminology.

💡 Pro tips

•For Amazon FBA, always calculate margin after all fees (referral + FBA fee + ad spend), not just COGS
•Gross margin above 40% gives most small businesses enough room to cover overhead and remain profitable
•If a competitor is pricing below your cost, use this calculator to find the minimum viable price
•Target margin varies widely by industry: retail 10–30%, SaaS 60–80%, services 30–50%

Frequently Asked Questions

Gross margin = (Revenue − Cost of Goods Sold) ÷ Revenue × 100. It only accounts for direct production or product costs. Net margin also subtracts all operating expenses — rent, software, marketing, salaries. For Amazon sellers, calculate net margin after all platform fees, FBA fees, and advertising costs — gross margin alone is misleading.