Calculate your profit, gross margin, and markup percentage based on the cost and selling price of a product.
This calculator computes your profit, gross margin percentage, and markup percentage based on a product's cost price and selling price - two related but different ways of expressing profitability that are easy to mix up.
Profit is simply the difference between selling price and cost. Margin expresses that profit as a percentage of the selling price (what portion of the revenue is profit). Markup expresses the same profit as a percentage of the cost price (how much you've added on top of cost).
Formula: Profit = Selling Price − Cost Price. Gross Margin % = (Profit ÷ Selling Price) × 100. Markup % = (Profit ÷ Cost Price) × 100.
Example: An item with a CA$50 cost price and an CA$80 selling price has a profit of CA$30, a gross margin of 37.5% (CA$30 ÷ CA$80), and a markup of 60% (CA$30 ÷ CA$50). Notice that margin and markup are different percentages for the same dollar profit - margin is always lower than markup when there's a profit, because it's measured against the larger selling price rather than the smaller cost price. (Note: this example is for illustration purposes only.)
Confusing margin and markup is one of the most common pricing mistakes - if you want a 50% gross margin, you can't simply add 50% to your cost (that gives a 33.3% margin, since CA$50 cost + 50% markup = CA$75 selling price, and CA$25 profit ÷ CA$75 = 33.3% margin). To achieve a target margin, you'd need to divide cost by (1 − target margin as a decimal): for a 50% margin on a CA$50 cost, the selling price would need to be CA$50 ÷ 0.5 = CA$100. Gross margin is also a key figure for understanding your business's overall profitability before operating expenses (rent, salaries, marketing, etc.) - net profit margin, after all expenses, will be lower than gross margin. Many Canadian businesses also need to factor GST/HST/PST into pricing decisions (see our HST/GST/PST Calculator) - sales tax is generally collected on top of the selling price and remitted to the government, so it shouldn't be confused with your margin or markup, which relate to your cost and revenue before tax.
Margin expresses profit as a percentage of the selling price (revenue), while markup expresses the same dollar profit as a percentage of the cost price. For the same profit amount, margin is always a smaller percentage than markup (assuming a profit), because the selling price is larger than the cost price. They're two different ways of describing the same profit, and mixing them up when setting prices is a common error.
Use the formula Selling Price = Cost ÷ (1 − Target Margin as a decimal). For example, to achieve a 40% margin on a CA\$60 cost, Selling Price = 60 ÷ (1 − 0.40) = 60 ÷ 0.60 = CA\$100. Simply adding 40% to the cost (CA\$60 × 1.40 = CA\$84) would only give you a 28.6% margin, not 40% - which is why the distinction between margin and markup matters for pricing.
This varies enormously by industry - retail businesses often operate on margins in the 20-50% range, while software or services businesses can have much higher margins (70%+) because their cost of goods sold is lower. There's no universal "good" number; compare your margin to typical figures for your specific industry and to your own historical performance.
No - this calculator works with your cost and selling prices before sales tax. Sales tax is generally collected from the customer on top of your selling price and remitted to the government, so it doesn't directly affect your margin or markup calculation, though it does affect the total amount the customer pays. See our HST/GST/PST Calculator for sales tax calculations.
For an accurate margin, "cost price" should include all costs directly attributable to the product - purchase or production cost, shipping/freight to acquire it, packaging, and any direct labour, for example. Excluding relevant costs will make your margin look better than it actually is, which could lead to underpricing.
No. Gross margin (calculated here) is based only on the cost of the specific product versus its selling price. Net profit margin accounts for all business expenses - rent, salaries, marketing, administrative costs, taxes, etc. - subtracted from total revenue. A business can have a healthy gross margin on individual products but still have a low or negative net profit margin overall if operating expenses are high.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and do not constitute financial or business advice. This calculator computes gross margin and markup based only on the cost and selling prices entered, and does not account for sales tax, operating expenses, or other costs. Always consult a qualified accountant or financial adviser for pricing and business financial decisions.