Profit margin
38.7%
- Selling price
- $30.00
- Profit per unit
- $11.60
- Profit margin (profit ÷ price)
- 38.7%
- Markup (profit ÷ cost)
- 72.5%
- Fees per unit
- $2.40
- Total cost per unit incl. fees
- $18.40
This calculator produces estimates from the numbers you enter, so it is only as accurate as your inputs. It is not tax, accounting or legal advice. Rules and fees differ by country and change over time; check the current terms that apply to you.
The short answer
Profit margin is profit divided by the selling price. Markup is profit divided by the cost. They differ: a 50% markup is only a 33% margin. Include fees and shipping in your costs, or the margin you see is higher than the margin you keep. Use the calculator to go from price to margin, or from target margin to price.
Worked example
These are the example values loaded into the calculator above, run through exactly the same formulas, so you can check the method against your own numbers.
| Inputs | |
|---|---|
| Product cost | $12.00 |
| Shipping and packaging | $4.00 |
| Selling fees | 8% |
| Selling price | $30.00 |
| Results | |
|---|---|
| Fees per unit | $2.40 |
| Profit per unit | $11.60 |
| Profit margin | 38.7% |
| Markup | 72.5% |
Two numbers cause more pricing mistakes than any others: margin and markup. They sound alike, they use the same inputs, and they give different answers. This calculator shows both, works out the profit per unit after fees and shipping, and can run backwards to give you the price that hits a margin or markup you choose.
How to use this calculator
- Enter your product cost per unit: what you pay to buy or make one item.
- Add shipping, packaging or other per-unit costs.
- Enter selling and payment fees as a percentage of the selling price.
- Choose what you want to work out:
- From a price to see your margin and markup.
- A target margin to find the price to charge.
- A target markup to find the price to charge.
- Enter the price or the target.
The formulas
Let the base cost be product cost plus other per-unit costs, and let the fee rate be your percentage fees.
- Fees = price × fee rate
- Profit = price − fees − base cost
- Margin = profit ÷ price
- Markup = profit ÷ base cost
To find a price:
- For a target margin m: price = base cost ÷ (1 − fee rate − m)
- For a target markup k: price = base cost × (1 + k) ÷ (1 − fee rate)
The second formula makes sure that after fees are taken out, the profit equals your target markup on cost. Both are tested against round trips: feeding the calculated price back in returns exactly your target.
Margin versus markup
A concrete case shows the difference. An item costs 50 and you sell it for 75. The profit is 25. As a share of cost, that is a 50% markup. As a share of the selling price, it is a margin of about 33%.
The distinction matters because people move between the two without noticing. If you want a 50% margin and apply a 50% markup, you will end up with a much lower margin than planned. If a supplier or a competitor quotes a "margin", ask which one they mean. Margin can never reach 100%, since there is always a cost, whereas markup can be any size.
How to read your result
The profit per unit is the number to focus on, because it is the money that pays for your time, advertising and mistakes. The margin tells you how much of each sale you keep, and it is the figure to compare across products. The markup tells you how much you added on top of cost, which is useful when you are buying stock.
Check the total cost per unit including fees. This is your true floor for pricing. Any price below it loses money on every sale, no matter what the headline margin looks like.
What margin do you need?
The right margin depends on what has to be paid for out of it. Advertising, returns, damaged stock, customer service time and your own pay all come out of profit. Products that need heavy advertising need a healthy margin to survive it. Our break-even ROAS calculator shows how much advertising a given margin can support. If your margin cannot cover a realistic advertising cost, the product is a poor candidate however good it looks.
Common mistakes
Ignoring fees. Marketplace and payment fees reduce profit on every sale.
Forgetting shipping and packaging. Free shipping is a cost, not a gift.
Confusing margin with markup. Decide which one you are using and stick to it.
Pricing from cost alone. Customers do not care what something cost you. Check the price against what comparable products sell for.
Ignoring returns and refunds. These are not in this calculator's per-unit numbers, so build them into your price or margin target separately.
Assumptions and limits
This calculator treats all costs other than fees as fixed per unit. It does not include your time, fixed monthly costs such as software, advertising, returns, tax, discounts or volume pricing. Fees are assumed to be a single percentage of the selling price, which suits most marketplaces and payment processors, but some charge additional flat amounts that you should add to the per-unit costs. For selling on marketplaces, see our guides to selling on Etsy and Amazon and print on demand, and for a full view of the economics of paid traffic, our page on dropshipping.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. If something costs 50 and sells for 75, the profit is 25, so the markup is 50% and the margin is one third, about 33%. Mixing them up is one of the most common pricing errors.
How do I calculate the selling price for a target margin?
Divide your cost by one minus the target margin. With a cost of 50 and a 20% margin, the price is 50 divided by 0.8, which is 62.50. If you also pay a percentage fee on each sale, subtract that percentage from the denominator as well. The calculator handles this in the target margin mode.
What is a good profit margin?
It depends heavily on the business, the competition and how much of your time is involved, so there is no single good number. A useful test is whether the margin, after fees, advertising and returns, leaves enough profit per sale to pay for the time and risk you put in. Compare margins across your own products first.
Should fees be included in the margin?
Yes. Marketplace and payment fees are a real cost of each sale, so leaving them out overstates your profit. Enter them as a percentage of the selling price and the calculator deducts them before working out the margin.
How we keep this calculator accurate
The formulas on this page are standard arithmetic, written out in full above so you can check them. Each one is covered by automated tests that compare the calculator against independently worked examples and round-trip checks, and the worked example is generated by the same code as the calculator. We use no third-party data, exchange rates or fee tables, because those go stale; fees and rates are always numbers you enter. If you spot a mistake or an assumption that does not fit your situation, please tell us. Our earnings disclaimer and editorial approach explain how the site works.
Written by
The editorial team behind How To Make Money Online, responsible for researching, writing, and fact-checking every guide on this site against current platform terms and fees.