Profit Margin Calculator
Profit margin calculator. Enter cost and selling price to instantly see gross profit, margin % and markup %.
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Enter cost and selling price to see gross profit, margin % and markup %. Useful for retail and hospitality pricing decisions.
What this calculator does
Takes a cost and a selling price and returns the gross profit in pounds, the margin percentage and the equivalent markup percentage, so you can compare items on a consistent basis.
Who it is for
- Operators reviewing a menu or drinks list line by line.
- Buyers comparing two suppliers where the cheaper cost does not always mean the better margin.
- Anyone building a price list against a target margin.
How to use it
- Enter the cost price, net of VAT.
- Enter the selling price, also net of VAT.
- Read gross profit, margin percentage and markup percentage together.
The formula
- Gross profit = Selling price - Cost
- Margin% = (Gross profit / Selling price) x 100
- Markup% = (Gross profit / Cost) x 100
Worked example
A main course costs £3.60 to produce and sells for £12.00 net of VAT.
- Gross profit = £12.00 - £3.60 = £8.40
- Margin = £8.40 / £12.00 = 70%
- Markup = £8.40 / £3.60 = 233.3%
£8.40 gross profit per dish, a 70% margin, which is the same thing as a 233.3% markup.
How to read your result
- Cash gross profit pays your bills; percentages do not. A high-percentage item that sells twice a week can contribute less than a lower-percentage item that sells fifty times.
- Compare margin across items only when the costs are built the same way - either all include wastage and garnish or none do.
- Margin will drop the moment discounting starts, so check discounted prices as separate lines.
What to do next
- Rank your menu by cash gross profit as well as by margin, then protect the items at the top of both lists.
- Re-cost anything where the supplier price has moved more than a few percent since the last review.
- Feed the same figures into the menu engineering calculator to bring sales volume into the decision.
Common mistakes to avoid
- Mixing a gross selling price with a net cost price.
- Leaving out garnish, sauces, oil and packaging, which can be several percentage points of the plate.
- Assuming margin is stable - it moves every time a cost moves.
Assumptions and limitations
- Gross profit here is before labour, rent, utilities and overheads. It is not net profit.
- Single-item calculation; it does not weight by sales mix.
Dumb Bambi provides general business information, not accounting, tax or legal advice. Read our calculation methodology or tell us about a mistake.
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Keep going with these tools
- GP Calculator - Gross profit, GP % and markup % in one place.
- Markup Calculator - Calculate selling price from cost and markup %.
- Break-Even Calculator - How many units you need to sell to break even.
Frequently asked questions
What is a good profit margin?+
It varies by industry. Retail typically targets 20–50%, restaurants 60–70% gross, professional services 30%+.
How is gross profit different from net profit?+
Gross profit is sales minus the direct cost of goods. Net profit is what remains after all overheads, wages, rent and tax.