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Profit Margin Calculator
Pick the right selling price for your products to increase your profits. Use this calculator to your profit margin!
Profit Margin Calculator
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Our profit margin calculator helps you determine how much money you will make off of your products or services so you can price them strategically and appropriately.
The calculator makes it fast and easy to reevaluate your pricing structure or calculate profit margins for many different products. To use the calculator, input the cost of the product and its markup percentage to calculate your selling price and your gross profit margin.
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Frequently asked questions
Profit margin is a percentage that indicates how much money you stand to make off of your product or service. This percentage identifies how much of every dollar your business collects in revenue is profit.
Your profit margin also helps you identify how healthy your business is and gain an understanding of which products or services are most valuable to your business. For example, if you have one product that has a high profit margin, while another product has a very low profit margin, you might consider eliminating that second product with a low profit margin so you can stock other products that bring in more money.
The profit margin formula requires several steps. You will need to know your cost of goods sold and your revenue or what you sell the product for:
- Deduct the cost of goods sold from your revenue, which will give you your gross profit.
- Divide your gross profit by your revenue.
- Convert the decimal form outcome to a percentage.
You can avoid this multi-step process by using a profit margin calculator.
Profit margins can vary significantly depending on the industry and business size. Generally speaking, a 10% profit margin is a standard margin. Food-related products and services tend to have lower profit margins, and a 20% margin is an ideal, healthy margin.
Your profit margin metrics can help you track the amount of money that you make from each product or service you offer. This is particularly valuable given fluctuating manufacturing costs, which can eat into your profits. You can use this data to determine when and if you need to increase your prices to maintain your sales margins.
Think of your profit margin as being a formula to help you calculate a product’s sale price. If it costs you $15 to create an item, and you want a 60% markup on the item, then according to the profit margin calculator, you should sell that item for $24. Your profit will be $9, and your gross margin will be 37.50%. If you want higher margins, you will need to increase the markup, or find a way to produce the item for less.
The process works the same way for a service that you’re providing. If you use $20 in supplies to provide a service, like vehicle detailing, and then you markup that service by 70%, you should charge $34. Your profit will be $14, and your gross margin will be 41.18%.
While this online calculator focuses on the profit margin of a product or service, many businesses also use operating profit margin and net margin data to evaluate the business’s success. Calculating operating profit margin is more complicated, and you will need data on net sales, total revenue, operating costs, net income, and more.