Profit Calculator — Calculate Profit Margin, Markup & Gross Profit (Net & Gross Prices)
Free profit calculator — unit profit, total profit, margin and markup in one step.
📚 Official sources
How It Works
Use this calculator to price your products correctly and check whether a trade is actually profitable. Enter your cost and selling price and the tool instantly returns unit profit, total profit, margin %, and markup %. If your selling price is VAT-inclusive, enter the VAT rate and the calculator strips it out before computing profit — so you see the real earning, not the tax pass-through.
- Enter the cost price (what you paid for the item).
- Enter the selling price (what the customer pays).
- If your selling price includes VAT, enter the VAT rate and keep the 'includes VAT' toggle on.
- Optionally enter a quantity to scale the total profit.
- Results update instantly: unit profit, total profit, margin %, and markup %.
How is profit (margin / markup) calculated?
At its core, profit is the difference between what a customer pays you and what it cost you to deliver the product or service: profit = sale price − cost. That single equation hides a lot of nuance, because both sides can be measured in several different ways and the figure most retailers actually care about — net profit at the end of the month — sits several layers below this headline number. The calculator above starts from the simplest version of the formula at the unit level, then lets you scale it by quantity, strip out VAT, and check both margin and markup percentages so you can spot pricing mistakes before they cost you real money.
The two percentage views every business owner has to keep straight are margin and markup. Margin expresses profit as a share of the selling price (margin = profit ÷ sale price × 100), so a product sold for 200 with 100 of profit shows a 50% margin. Markup expresses profit as a share of the cost (markup = profit ÷ cost × 100), and the same product carries a 100% markup. They describe the same trade but answer different questions: margin tells you what fraction of revenue you keep, markup tells you how much you uplift cost when pricing. Confusing them is one of the most common — and most expensive — mistakes in small business pricing. A retailer who applies a 30% markup believing they earn a 30% margin actually earns only about 23% margin, and the gap compounds across thousands of transactions.
Beyond the unit level, accounting practice distinguishes gross profit from net profit, both defined in the IFRS Conceptual Framework. Gross profit equals revenue minus the cost of goods sold (COGS) — the direct, variable cost of producing or sourcing what you sold. Net profit equals gross profit minus all overhead: rent, salaries, marketing, software, depreciation, taxes. A business can show a healthy 40% gross margin and still report a loss at the bottom line if fixed costs swamp the gross. The calculator above intentionally focuses on unit-level operating profit so you can model individual SKUs or trades; for a true net-profit picture you have to add per-unit overhead to your cost field or run the figures through a separate P&L statement.
VAT (or sales tax in non-EU jurisdictions) is one of the easiest places to overstate profit. Under EU VAT Directive 2006/112/EC and equivalent national rules, VAT collected from the customer never belongs to the business — it is collected on behalf of the state and remitted to the tax authority. If your selling price is gross (VAT-inclusive) you must strip the VAT out before computing profit; otherwise you'll book the tax pass-through as earnings and over-pay yourself, then face a shortfall when the VAT return comes due. The calculator's VAT toggle handles this automatically: enter the gross price plus the rate, and the engine subtracts the embedded tax before applying the profit formula.
Healthy profit margins vary dramatically by industry, and benchmarking against the wrong reference is another classic mistake. According to U.S. SBA pricing guides and Statista industry data, retail typically runs at 25–50% gross margin but only 2–5% net margin once rent, payroll and shrinkage are accounted for. Restaurants average 3–6% net margin. Software-as-a-service companies enjoy 70%+ gross margin thanks to near-zero marginal cost, and converge to 10–25% net at scale once sales and marketing eat into the gross. Manufacturing typically lands at 5–10% net. Consulting and professional services, where the main cost is salaries, sit in the 10–30% net range. Comparing your corner shop's 4% net to Apple's 25% is meaningless; benchmark against your own industry vertical and your own historical run-rate.
Several pricing pitfalls are worth flagging because they consistently destroy margin in small businesses. First, ignoring fixed costs: many founders price purely off COGS with a target markup and discover at year-end that the rent and the SaaS subscriptions they forgot to allocate have wiped out the operating profit. Second, discount math: a 20% discount on a 40%-margin product cuts the margin in half, not by 20%, because the discount comes off the price not the cost. Third, mixing up gross and net pricing in supplier and customer quotes — a recipe for invoicing surprises. Fourth, anchoring permanently on promotional prices, which trains customers to wait for sales and erodes the reference price. Run every discount, bundle and price change through the calculator before announcing it, not after.
All formulas used here come from standard managerial accounting and the IFRS Conceptual Framework, with industry benchmarks cross-checked against Investopedia, the U.S. Small Business Administration and Statista. The links in the next section point to those primary references — start there if you want to dig into a specific definition or benchmark.
💡 Also explore: VAT Calculator · Salary Calculator · Hourly Rate Calculator
💡 Worked Examples
Example 1 — Gross prices (VAT-inclusive)
Purchase price: 121 · Selling price: 242 · VAT: 21% · Quantity: 1
→ Total profit: 121 · of which VAT: 21 · Profit (ex. VAT): 100
Margin: 50% · Markup: 100%
Example 2 — Net prices (VAT-exclusive)
Purchase price: 100 · Selling price: 200 · VAT: 21% · Quantity: 1
→ Total profit: 121 · of which VAT: 21 · Profit (ex. VAT): 100
Margin: 50% · Markup: 100%
Both examples describe the same trade — only the input style differs. Pick the one that matches how you track supplier and selling prices.
Frequently Asked Questions
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price (profit ÷ selling price × 100). Markup is profit as a percentage of the cost (profit ÷ cost × 100). For the same trade, markup is always higher than margin.
Should I use the net or gross selling price?
Enter the price the customer actually pays. If that price includes VAT, enter the VAT rate and keep 'includes VAT' on — the calculator will strip VAT before computing profit so you see the real earning.
How do I compute selling price from a target margin?
Selling price = Cost ÷ (1 − target margin / 100). For example, with a 40% target margin on a cost of 100, the selling price is 100 ÷ (1 − 0.40) = 166.67.
Is VAT part of my profit?
No. VAT is collected on behalf of the tax authority and passed through. The profit shown by this calculator is always VAT-exclusive.
Does the calculator handle loss (negative profit)?
Yes. If the selling price (net of VAT) is below the cost, the result shows a loss with a red indicator.
How is profit taxed?
Profit tax depends on your structure. Sole traders and LLCs are typically taxed on net profit via personal or corporate income tax (EU corporate rates range 9–35%). The calculator shows pre-tax operating profit — subtract your effective tax rate to get what actually lands in your pocket. Consult our Dividend Tax and Salary calculators for the rest of the chain.
What's a healthy profit margin?
Retail: 2–5% net margin, but 25–50% gross margin. Restaurants: 3–6% net. SaaS: 70%+ gross margin, 10–25% net at scale. Manufacturing: 5–10% net. Consulting/services: 10–30% net. Benchmark against your industry, not against Apple (highly atypical at 25%+ net).
How should I price to cover all business costs, not just product cost?
Add fixed costs (rent, salaries, marketing, software) divided by expected units sold as a 'per-unit overhead' to your product cost. Example: cost 10, overhead 5/unit, target margin 30% → sell at (10+5)/(1−0.30) = 21.43. Ignoring fixed costs is the #1 reason small businesses look profitable on paper but lose money.
Does this include fixed costs or only variable costs?
Only variable product costs (COGS) by default. Fixed costs like rent, salaries and marketing are not subtracted — add them yourself via the cost field if you want net operating profit. For line-item analysis, variable-only is usually what you want; for month-end profitability, include fixed costs.
How do discounts affect margin, and how can I discount without killing margin?
A 20% discount on a 40% margin product halves your margin to 20%. To keep 40% margin after a 20% discount, you'd need to cut costs by 13%. Alternatives that preserve margin: bundle discounts (raise AOV), time-limited offers (don't anchor lower), volume tiers for wholesale. Every discount should be modeled, not spontaneously offered.