How to Calculate Profit Margin
Profit margin shows how much profit a business keeps from its revenue after costs are subtracted.
Profit margin formula
The basic formula is:
Profit = Revenue - Cost
Profit Margin = Profit / Revenue * 100Worked example
If a business makes $10,000 in revenue and has $6,500 in cost, its profit is $3,500.
Divide $3,500 by $10,000, then multiply by 100. The profit margin is 35%.
Margin vs markup
Margin and markup use different denominators. Margin compares profit to revenue. Markup compares profit to cost. A 35% margin is not the same as a 35% markup. See markup vs margin for a detailed comparison.
Use the calculator
Use the Profit Margin Calculator to calculate profit and margin percentage without doing the math manually.
FAQ
What is the profit margin formula?
Profit margin equals profit divided by revenue, multiplied by 100.
Should I use revenue or cost in the denominator?
Use revenue for margin. If you divide profit by cost, you are calculating markup.
What does a 35% profit margin mean?
It means the business keeps 35 cents of profit for every dollar of revenue before any costs not included in the calculation.