Profit margin shows how much profit remains from revenue after costs are removed. It is one of the simplest ways to understand how profitable a sale or business activity is.
Use the calculator first, then read the guide below to understand the formula and examples.
Direct answer
Profit margin is calculated by subtracting cost from revenue, dividing the profit by revenue, and multiplying by 100.
Formula
Profit = revenue - cost. Profit margin = profit ÷ revenue × 100.
Example
If revenue is 100 and cost is 70, profit is 30. Profit margin is 30 ÷ 100 × 100 = 30%.
Why margin matters
Profit margin helps compare products, offers, and business models. A product with high sales but low margin may not be as attractive as a product with fewer sales but higher margin.
Common mistake
Do not confuse profit margin with markup. Profit margin uses revenue as the base. Markup uses cost as the base.
FAQs
Is profit margin the same as profit?
No. Profit is an amount. Profit margin is a percentage.
Can profit margin be negative?
Yes. If cost is higher than revenue, the margin becomes negative.
What is a good profit margin?
It depends on the industry, product, and business model.