Profit Margin Calculator
Compare profit margins and markup, then calculate a price for your target margin.
Revenue and costs
Use the same period and GST basis for every amount.
Cost of goods sold or costs allocated to the service.
Exclude direct costs already entered. Income tax is excluded.
Target selling price
Enter a unit cost or a service’s allocated full cost.
Enter at least 0% and less than 100%.
Industry comparison
Grocery means grocery retailing and convenience stores.
Enter annual revenue and costs above before comparing.
60%
Profit after direct costs as a share of revenue.
30%
150%
$720
$360
$1,200.00
Published industry band
Select an industry to compare annual figures.
Before income tax. Target price uses its own cost and margin. Industry bands use annual figures and whole-dollar turnover.
Margin and Markup
A profit margin calculator divides profit by revenue. Markup divides the amount added to direct costs by those direct costs. The different denominators produce different percentages for the same sale.
For a $100 sale with $80 of direct costs, gross profit is $20. Divide $20 by the $100 revenue for a 20% gross margin. The same $20 divided by the $80 cost gives 25% markup. Entering 25% as the margin would overstate this sale’s margin.
Gross margin uses revenue less direct costs. Net margin before tax also subtracts the other operating costs you enter. Use the same period and GST basis throughout. Exclude GST collected and recoverable GST from costs when comparing GST-exclusive accounts.
Solve for a Target Price
The required selling price is cost divided by one minus the target margin as a decimal. With a $480 cost and a 60% target margin, $480 divided by 0.4 gives a $1,200 price.
The target calculation uses its separate cost field. Use direct cost for a gross margin target, or include allocated operating costs for a margin after those costs. For a service quote, allocate the costs to that service before entering them.
A positive cost cannot produce a 100% margin at a finite price. At zero cost, every positive price has a 100% margin, so a lower target has no positive solution. The tool shows Unavailable for those cases. Selling prices display cents after the calculation.
Gross and Net Results
In the fictional service example shown above, revenue is $1,200 and direct delivery costs are $480. Gross profit is $720 and gross margin is 60%. The markup on those direct costs is 150%.
Allocating another $360 of operating costs leaves $360 of net profit before tax, or a 30% net margin. Counting the $480 again in other operating costs would deduct the same expense twice.
For a service, the direct-cost result depends on which delivery costs you allocate to the job. Include the remaining costs in operating costs to compare the full result. Business Victoria’s margin and markup formulas use the same revenue and cost denominators.
Zero revenue leaves margin undefined, while profit can still show a loss. Zero direct costs leave markup undefined. Negative profits and margins remain visible. All figures stay on this page without uploads or browser storage.
Compare a Published Industry Band
The optional comparison contains the Australian Taxation Office (ATO) 2023-24 edition for coffee shops and grocery retailing and convenience stores. Select a category only when the business fits the ATO’s industry description. Coffee carts and mobile coffee retailers fall outside the coffee shop category. Grocery stores mainly selling liquor, fuel or cooked food also fall outside the selected category.
Replace the service example with annual business figures before comparing. Direct costs must match cost of sales, and direct plus other operating costs must match total expenses on the relevant return. The tool selects the published turnover band using whole dollars.
The comparison shows cost of sales divided by turnover and total expenses divided by turnover, alongside each published range. These are expense ratios. Their percentages cannot be compared directly with a gross or net margin.
For example, a grocery retailer with $300,000 turnover, $210,000 cost of sales and $60,000 other expenses has ratios of 70% and 90%. Both sit inside that edition’s respective bands of 59% to 71% and 82% to 90%.
An amount outside a band prompts a review of the business’s circumstances and records. It does not establish an error or a tax shortfall. Check the category exclusions and definitions in the ATO’s published small-business benchmarks before using the comparison.