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Guides · 1 min read

How to Calculate Profit Percentage (Margin) — One Formula

How to calculate profit as a percentage: profit margin = profit ÷ revenue × 100%. Gross vs net vs markup explained with examples, plus the reverse formula for setting targets.

“What percent am I making?” comes down to one formula — as long as you pick the right profit.

The core formula

Profit percentage (margin) = Profit ÷ Revenue × 100%

Example: monthly revenue $50,000, costs $35,000. Profit = $15,000; margin = 15,000 ÷ 50,000 = 30%.

Three kinds of “profit percentage”

MetricFormulaAnswers
Gross margin(Revenue − COGS) ÷ RevenueDoes the product itself make money?
Net marginNet profit ÷ RevenueWhat’s left after rent, payroll, ads?
MarkupProfit ÷ CostHow much was added on top of cost?

Same business, very different numbers: revenue $100, product cost $60, rent + payroll $25. Gross margin = 40%; net margin = (100 − 60 − 25) ÷ 100 = 15%; markup = 40 ÷ 60 ≈ 66.7%.

When someone asks “what’s your profit percentage”, say which one you mean.

Running it backwards for targets

“I want to make 20% — what should revenue be?” Revenue = Cost ÷ (1 − target margin). Cost $80, target 20%: revenue = 80 ÷ 0.8 = $100.

Tools

One-line takeaway

Profit over revenue is margin; profit over cost is markup. Same numerator, different denominator, very different numbers.

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