METHOD & GUIDANCE
How this calculation works
Keep every input on the same time basis—for example, one month or one financial year—and do not mix cash figures with accrual figures. Tool IQ recalculates every output immediately; nothing you enter is saved or sent to us.
How to use the result
Compare the result with your target margin, then change price or unit cost separately to see which lever closes the gap with the least commercial risk.
Worked example
The opening example sells at 120 with 72 of cost. Profit is 48, so gross margin is 40% while markup on cost is 66.7%.
Common mistakes
- Treating markup and margin as interchangeable.
- Leaving delivery, payment or fulfilment costs out of unit cost.
- Comparing tax-inclusive revenue with tax-exclusive costs.
Frequently asked questions
Is the profit margin calculator free?
Yes. It requires no account and stores no calculation inputs.
Can I use the answer for a formal filing?
No. It is a planning estimate, not accounting, tax, legal or investment advice. Confirm material decisions with a qualified professional.
Which period should I use?
Keep every input on the same basis—for example, one month or one financial year. Use current figures first, then save a cautious scenario for comparison.
What is the difference between margin and markup?
Margin divides profit by selling price; markup divides profit by cost. A £60 cost sold for £90 has a £30 profit, 33.3% margin and 50% markup.
Which costs belong in cost per sale?
Include costs caused by fulfilling that sale, such as product, direct labour, marketplace commission, payment fee or delivery where applicable. Review fixed overhead separately unless it is allocated consistently.
Continue the decision
- Break-even Calculator — Find the sales volume needed to cover every cost.
Popular small-business decision paths
Method reviewed 5 August 2026. Figures are illustrative and calculated locally in your browser. Official sources are linked where a rule or obligation affects how the result should be used. Read the Tool IQ calculation standard for our checking process, limitations and corrections policy.