Margin (profit margin) is the percentage of your selling price that remains as profit after subtracting cost. It's calculated as Profit divided by Selling Price, multiplied by 100. Margin tells you how much of every rupee or dollar you collect from a sale is actually kept as profit, rather than spent covering the cost of the product or service.

How do I calculate margin?

Margin (%) = [(Selling Price − Cost) / Selling Price] × 100. For example, if a product costs ₹600 and sells for ₹1,000, Profit = ₹400, and Margin = (400 / 1,000) × 100 = 40%. If you instead know your cost and target margin, you can rearrange the formula to solve for selling price: Selling Price = Cost / (1 − Margin%). Our Margin Calculator handles both directions automatically.

What is the difference between margin and markup?

Margin is profit as a percentage of selling price; markup is profit as a percentage of cost. Because selling price is always higher than cost on a profitable sale, margin is always a smaller percentage than markup for the same transaction. For example, a ₹40 profit on a ₹100 sale (₹60 cost) is a 40% margin but a 66.7% markup. Mixing the two up is one of the most common pricing mistakes.

What is a healthy profit margin?

A healthy margin varies widely by industry. Retail and ecommerce businesses typically run net margins of 5-10%, restaurants often sit around 3-5%, while software and digital services can exceed 20-30% due to low variable costs. Rather than chasing a universal number, compare your margin against direct competitors in your own industry and track it over time.

How do businesses use margin in decision-making?

Businesses use margin to set prices that cover costs with a healthy buffer, compare profitability across products or services, decide which items to promote or discontinue, and benchmark performance against competitors. Tracking margin over time also helps flag rising costs or pricing pressure before they seriously damage profitability.

Business & Ecommerce Pricing

Margin Calculator — Profit Margin & Selling Price (2026)

Calculate profit margin from cost and selling price, or work backwards from cost and target margin to find the right selling price — instantly.

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Works forwards or backwards

Margin Calculator

Choose what you know — cost & selling price, or cost & target margin.

Cost (₹)

Cost of goods sold, production cost, or total expenses

Selling Price (₹)

The price you sell at, or plan to sell at

Results

Profit

₹400

Margin %

40.00%

Markup % (on cost)

66.67%

A cost of ₹600 and selling price of ₹1,000 gives a profit of ₹400 — a margin of 40.00%.

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What is Margin?

Margin — short for profit margin — is the percentage of your selling price that you actually keep as profit after covering cost. It answers a simple but essential pricing question: out of every rupee a customer pays, how much is profit and how much just covers what the sale cost you?

Margin is the single most-used pricing metric across retail, ecommerce, manufacturing, and services because it's expressed relative to price — the number customers actually see and pay. That makes it directly comparable across products with very different price points, and it's the figure most pricing decisions, discount limits, and profitability targets are built around.

Use the Margin Calculator above to find your margin from cost and price, or work backwards from cost and a target margin to find the selling price you need. For a deeper breakdown of gross vs net profitability, see our Profit Margin Calculator.

Margin Formula

The core formula, plus the reverse formula for solving selling price.

Forward: Find Margin

Margin (%) = [(Price − Cost) / Price] × 100

Profit = Selling Price − Cost

Use this when you know cost and selling price.

Reverse: Find Selling Price

Selling Price = Cost / (1 − Margin%)

Profit = Selling Price − Cost

Use this when you know cost and a target margin, and need to set price.

Example: a product costs ₹600 and you want a 40% margin. Selling Price = 600 / (1 − 0.40) = 600 / 0.60 = ₹1,000. Profit = ₹1,000 − ₹600 = ₹400, which checks out at exactly 40% margin.

Margin vs Markup

Same profit, two different percentages — and mixing them up is a common, costly mistake.

Margin

Profit as a percentage of selling price. Always smaller than markup on the same sale, since selling price is larger than cost.

Margin = Profit / Price

Markup

Profit as a percentage of cost. Always larger than margin on the same sale — often mistaken for it when setting prices.

Markup = Profit / Cost

Example: cost ₹60, selling price ₹100, profit ₹40. Margin = 40 / 100 = 40%. Markup = 40 / 60 = 66.7%. Pricing at a "40% markup" instead of a "40% margin" would produce a lower selling price and a smaller actual profit than intended — the gap widens as the target percentage grows.

Business Examples

How different businesses apply the margin calculation day to day.

Retail Reseller

A boutique buys stock at ₹450 per unit and sells it for ₹900.

Profit = ₹900 − ₹450 = ₹450

Margin = (450 / 900) × 100 = 50%

Service Pricing (Reverse)

An agency's cost to deliver a project is ₹40,000, and it wants a 35% margin.

Selling Price = 40,000 / (1 − 0.35) = ₹61,538

Profit = ₹61,538 − ₹40,000 = ₹21,538

Pricing Strategies

Common approaches businesses use to set prices around a target margin.

Cost-Plus Pricing

Start with cost, apply a fixed target margin, and solve for selling price using the reverse formula. Simple and predictable, but ignores what competitors charge.

Competitor-Based Pricing

Set price near the market rate, then check the resulting margin against cost. If the margin is too thin, either cost or positioning needs to change — not just the price.

Tiered Margin Targets

Apply different target margins to different product categories based on demand, competition, and how easily each one is substituted — instead of one flat percentage across everything.

Value-Based Pricing

Price according to the value delivered to the customer, then check that the resulting margin is sustainable. Works best for differentiated products and services rather than commodities.

Common Pricing Mistakes

Confusing Margin with Markup

Applying a "50% margin" formula when you actually mean a 50% markup on cost results in systematically underpriced products and thinner-than-intended profit.

Leaving Out Real Costs

Shipping, payment processing fees, marketplace commissions, packaging, returns, and wastage are frequently excluded from "cost," making margin look better on paper than it actually is.

Setting One Margin for Every Product

A flat margin target across a whole catalog usually overprices low-demand items and leaves money on the table for high-demand ones.

Never Revisiting Margins as Costs Rise

Supplier prices, shipping rates, and fees change over time. Prices set once and never reviewed quietly erode margin until profitability disappears.

Related Financial Tools

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Frequently Asked Questions

Answers to common questions about calculating and using margin.

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