Free Profit Margin Calculator

This free tool is built by Connecteam, the platform for managing your team.

How to Use Our Free Profit Margin Calculator

What is Profit Margin?

Profit margin is the percentage of revenue you gain after covering costs. It’s the markup of what it costs to provide or produce the product and what you charge your customers.

For business owners, calculating their costs is an important part of determining their profit margin. You need to know what goes into your goods or services in order to price them competitively and fairly. 

There are many factors that contribute to cost, like materials, labor, and overhead. For example, if you run a retail store that sells jeans, your cost isn’t just the denim itself.

The cost of your jeans includes the material (fabric, thread, hardware), the labor it takes to produce the jeans, the delivery from the production site to your store, the overhead involved in operating a store (rent, utilities, insurance), and the labor involved in selling the jeans. 

Each product you offer has its own associated expenses. Before you can make a profit, you need to cover those costs. What you charge on top of the costs becomes your profit margin, and the amount not directly related to cost is your profit.

How to Calculate Profit Margin

Let’s break down how to calculate profit margin with a simple formula: 

Profit Margin = [(Sales Price – Cost) ÷ Sales Price)] × 100

Now, we can try out the formula using the jeans example from earlier:

One of the products that Shelly sells at her store is jeans. Including materials, labor, and overhead, each pair of jeans costs approximately $35. Shelly sells one pair for $50. Let’s calculate her profit margin:

$50 Sales Price – $35 Cost = $15 Profit

($15 Profit ÷ 50 Sales Price) × 100 = 30% Profit Margin

Shelly also wants to know what the markup percentage is, which she can easily calculate:

($15 Profit ÷ $35 Cost) × 100 = 43% Markup

Remember, the profit margin is how much of your sales price is profit, while your markup percentage measures how much you increase the sales price above the cost.

Reduce Your Overhead Cost With Connecteam

Improving profit margins often comes down to reducing unnecessary operating costs. Connecteam helps you do exactly that with tools that streamline everyday operations. Create and update schedules in seconds, track work hours with a GPS-enabled time clock and geofencing to prevent off-site clock-ins, assign tasks with checklists and real-time progress tracking, and onboard new hires faster with mobile training courses they can complete from anywhere. By reducing admin work, payroll errors, and inefficiencies, Connecteam helps you run a more profitable business. Try Connecteam for free today!