Profit Margin Calculator

Calculate gross margin, net margin, and markup. Or work backwards from a desired margin to find your selling price.

Profit margin tells you what percentage of each pound in revenue your business keeps after costs. According to the Office for National Statistics, the average UK SME net profit margin sits at roughly 10-15%, though this varies enormously by sector. Getting your margin right is the difference between a business that thrives and one that slowly bleeds cash.

I built this calculator because too many small business owners confuse margin with markup and end up underpricing their products. Margin is your profit as a percentage of the selling price; markup is your profit as a percentage of cost. Mix them up, and a product you think earns 40% could actually be earning far less.

Whether you run a shopfront, a consultancy, or an online store, understanding both gross and net margin helps you price confidently, negotiate with suppliers, and spot overhead creep before it eats your bottom line.

How it works

  1. Enter your revenue (or selling price) and cost of goods sold.
  2. Optionally add overheads such as rent, utilities, and salaries for a net margin figure.
  3. Or switch mode to work backwards: enter your cost and desired margin to find the selling price you need.

Written by the CalcStack team · Last updated April 2026

Calculation mode

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For net margin calculation

Frequently asked questions

What is profit margin?▾
Profit margin is the percentage of revenue that remains as profit after costs are deducted. Gross margin considers only direct costs (cost of goods sold), while net margin also subtracts overheads like rent, salaries, and utilities.
What is the difference between margin and markup?▾
Margin is profit as a percentage of the selling price (revenue). Markup is profit as a percentage of the cost. For example, if you buy for £60 and sell for £100, the margin is 40% but the markup is 66.7%.
What is a good profit margin for a UK business?▾
It varies by industry. Retail typically sees 2-5% net margin, professional services 15-40%, construction 5-10%, and software/SaaS 20-40%. The UK average across all industries is roughly 10-15% net profit margin.
How do I calculate selling price from a desired margin?▾
Divide your cost by (1 minus the desired margin as a decimal). For example, if your cost is £60 and you want a 40% margin: £60 / (1 - 0.40) = £100 selling price.
What is gross profit vs net profit?▾
Gross profit is revenue minus direct costs (materials, labour). Net profit is gross profit minus all overheads (rent, utilities, admin, marketing). Net profit is the true bottom line of your business.
Does VAT affect profit margin?▾
If you are VAT registered, you should calculate margins on VAT-exclusive figures. VAT is collected on behalf of HMRC and is not your revenue. If you are not VAT registered, your costs may include irrecoverable VAT.
How can I improve my profit margin?▾
You can improve margins by: increasing prices, reducing cost of goods (better suppliers, bulk buying), cutting overheads, improving efficiency, focusing on higher-margin products, or reducing waste and returns.
What is a break-even margin?▾
Break-even is when your total revenue exactly covers all costs (both direct and overheads), resulting in a net margin of 0%. Any sales above the break-even point generate profit.
Should I use margin or markup for pricing?▾
Both work, but margin is more commonly used in financial reporting and by investors. Markup is often used in retail and wholesale pricing. The key is to be consistent and know which one you are using.
How do I calculate margin for a service business?▾
For services, your direct costs are typically labour (time spent). Calculate your hourly cost (salary + employer NI + pension), multiply by hours on the project, then compare to the price charged. Overheads include office costs, software, insurance etc.

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© 2026 CalcStack — a Flavoureak UK Ltd product. This calculator provides estimates only and is not financial advice.