Profit Margin Calculator
Find your true net profit margin after accounting for cost of goods, fixed costs per unit, and taxes. Use it when pricing products or evaluating whether a SKU is actually profitable.
About this calculator
Profit margin measures what percentage of revenue remains as profit after all costs are deducted. This calculator computes net profit margin using the formula: Margin (%) = ((sellingPrice − costPrice − fixedCosts − (sellingPrice × taxRate / 100)) / sellingPrice) × 100. The numerator represents net profit: start with the selling price, subtract the cost of goods sold, subtract fixed costs allocated per unit, and subtract the tax owed on revenue. Dividing by the selling price converts this to a percentage. A positive margin means the product is profitable; a negative margin signals that costs exceed revenue. Businesses use this figure to set minimum viable prices, compare product lines, and negotiate with suppliers.
How to use
Suppose you sell a product for $50, your cost of goods is $20, fixed costs per unit are $5, and your tax rate is 10%. Step 1 — Calculate tax: $50 × 10 / 100 = $5. Step 2 — Net profit: $50 − $20 − $5 − $5 = $20. Step 3 — Margin: ($20 / $50) × 100 = 40%. Your net profit margin is 40%, meaning you keep $0.40 of every dollar sold after COGS, fixed costs, and taxes.
Frequently asked questions
What is a good profit margin percentage for a retail product?
For physical retail products, a net margin of 10–20% is generally considered healthy, though this varies widely by industry. Grocery and consumer electronics businesses often operate on margins below 5%, while software and luxury goods can exceed 50%. The most important benchmark is your own industry average, which you can find in sector-specific financial reports. Always track margin trends over time rather than relying on a single snapshot.
How does tax rate affect profit margin in this calculator?
The tax rate is applied to the selling price to estimate the tax cost per unit, which is then deducted from gross profit before calculating the margin. This approximation models a sales-tax or VAT-style obligation on revenue. For income-tax scenarios, the actual calculation would differ because income tax applies to total net profit rather than per-unit revenue. Always consult an accountant for precise tax liability, but this estimate gives useful pricing guidance.
What is the difference between profit margin and markup?
Profit margin expresses profit as a percentage of the selling price, while markup expresses profit as a percentage of the cost price. For example, if you buy for $20 and sell for $50, the profit is $30: the markup is $30 / $20 = 150%, but the margin is $30 / $50 = 60%. Confusing the two is a common pricing mistake. This calculator focuses on margin, which is more useful for understanding revenue efficiency and comparing across businesses of different sizes.