> Source: https://tryordinary.com/tools/profit-margin-calculator

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# Profit margin calculator

Enter a selling price and a cost to get profit, margin and markup. Or start from a target margin and get the price to charge.

Find my marginPrice for a target marginSelling price$Excluding sales tax or VAT.

Cost$What the item costs you: product, plus shipping and fees if you want net margin.

Profit margin40.0%Profit as a share of the selling price.Profit$20.00Per unit.Markup66.7%Profit as a share of cost.

## How to calculate profit margin

profit = selling price − cost
profit margin = profit ÷ selling price
markup = profit ÷ cost

### Worked example

A product sells for **$50** and costs **$30** to make and land.

profit = $50 − $30 = $20
margin = $20 ÷ $50 = 40%
markup = $20 ÷ $30 = 66.7%

### Working backwards from a target margin

price = cost ÷ (1 − target margin)

For a 40% margin on the same $30 cost: $30 ÷ (1 − 0.40) = **$50**. Adding 40% to the cost instead gives $42, which is only a 28.6% margin. That gap is the most common pricing mistake the margin-versus-markup confusion causes.

### Which costs to include

- **Gross margin:** cost of the goods only.
- **Contribution margin:** add shipping, fulfilment and payment fees. This is the margin that sets your [break-even ROAS](/tools/break-even-roas-calculator).
- **Net margin:** everything, including ad spend and overheads.

With Ordinary

## Margin on every order, not one product at a time.

A margin worked out per product leaves out what each order costs to deliver, and what happens when a campaign sells more of your thinnest-margin lines.

Ordinary reads cost per item from Shopify, adds your shipping, fulfilment and payment fees, and records what each order cost at the time it was placed. Product profit and profit by channel sit next to revenue, so the bestseller that barely pays for itself stops hiding in a blended average.

[Connect your store](https://apps.shopify.com/ordinary-attribution-ab-testing) [How profit tracking works](/solutions/profit-margins)

## Frequently asked questions

### How do you calculate profit margin?

Subtract the cost from the selling price to get the profit, then divide the profit by the selling price. A product that sells for $50 and costs $30 makes $20, a 40% margin.

### 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. The same $20 profit on a $30 cost and $50 price is a 40% margin and a 66.7% markup. Pricing with a 40% markup instead of a 40% margin leaves you at about 29% margin.

### How do I price a product for a target margin?

Divide the cost by one minus the target margin. For a 40% margin on a $30 cost: $30 ÷ 0.6 = $50. Use the price-for-a-target-margin mode to do it for any cost.

### What is a good profit margin for ecommerce?

Margins vary widely by category. Many direct-to-consumer brands aim for a gross margin of 50% or more on product cost, because shipping, payment fees, returns and advertising all come out of that margin before any profit is left.

### What's the difference between gross margin and net margin?

Gross margin subtracts only the cost of the goods. Contribution margin also subtracts per-order costs like shipping and payment fees. Net margin subtracts everything, including ads, salaries and overheads. Enter costs to match the margin you want to see.

### Can profit margin be 100% or more?

No. A 100% margin would mean the product cost nothing, and anything above it is impossible. Markup has no ceiling: a $10 item sold for $50 is a 400% markup but an 80% margin.

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- [02 / Calculator↗ Break-even ROAS calculator The lowest ROAS that doesn't lose money, from your real costs.](/tools/break-even-roas-calculator)
- [03 / Calculator↗ CAC calculator What it costs to win one new customer, paid and fully loaded.](/tools/cac-calculator)
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