What profit margin means
Profit margin is the profit expressed as a percentage of the selling price. If something sells for 100 and cost 40, the 60 of profit is a 60% margin. Because it's measured against the price the customer pays, margin can never exceed 100% — a useful sanity check, and the key difference from markup.
Margin vs markup
- Margin divides profit by the selling price. It answers "what fraction of each sale is profit?"
- Markup divides profit by the cost. It answers "how much did I add on top of cost?"
- The same deal always shows a higher markup than margin — 150% markup is the same as 60% margin in the example above.
Frequently asked questions
Can margin be more than 100%?
No. Since margin is profit divided by selling price, it approaches but never reaches 100% (that would mean zero cost). Markup, however, can exceed 100%.
What does a negative margin mean?
You're selling below cost, so each sale loses money. The calculator flags this in red.
Is this gross or net margin?
This is gross margin on a single item — price minus direct cost. Net margin would also subtract overheads, tax and other expenses.