Profit Margin Calculator

Price your products for better profits

Quickly calculate your profit margin and earnings per item. Simply enter your product cost and selling price to see how much profit you make.

Cost per item
$
Markup i 300%
%
Advanced
Shipping
$
Customer acquisition cost i
$
Key metrics
$14,961.00
Profit per unit sold
Sell price $19,996.00
Total cost $5,035.00
Gross profit $14,961.00
Price breakdown
74.8%
Margin
Gross margin
74.8%
Product cost
25.0%
Shipping
0.2%
Acq. cost
0.0%
Nicely done. With a 300% markup, your sell price is $19,996.00 and you earn $14,961.00 per sale — a 74.8% profit margin.

How to Price Your Products

Pricing your products correctly is one of the most critical decisions for your business. Setting the right price helps cover your operating expenses, offset acquisition costs, and maximize your overall net earnings.

Core Pricing Formulas

Markup Percentage

The ratio of profit to the purchase cost of an item. Shows how much more you sell a product for compared to what you paid for it.

Markup % = ((Selling Price - Product Cost) / Product Cost) * 100

Profit Margin Percentage

The percentage of the selling price that is kept as profit. Tells you how many cents of profit you keep for every dollar of sales.

Profit Margin % = ((Selling Price - Total Cost) / Selling Price) * 100

Cost Stack & Selling Price Diagram

This diagram shows how your product costs, shipping expenses, customer acquisition cost, and gross profit combine to make up the final selling price of your item.

SELLING PRICE (100%)
Profit (74.8%)
Cost (25.0%)
Gross Profit: Money you keep
Product Cost: Supplier cost
Shipping Cost: Packing & postage
CAC: Marketing cost per sale

Understand Your Business Pricing Metrics

Let's look at a real-time scenario. Imagine you sell a premium product for $2,000. Here is how markup, margins, shipping, and customer acquisition costs behave:

1. Markup vs. Profit Margin

If your supplier cost is $1,000 and you sell it for $2,000:

Markup (100%): +$1,000 on cost
Profit Margin (50%): 50% of sell price

Markup represents how much you add to the cost, whereas margin represents how much profit you keep out of the total selling price.

2. Shipping Deductions

If you offer free shipping and it costs you $150 to ship the item:

Profit Margin Shrinkage:
Without Shipping: 50.0% Margin ($1,000 profit)
With $150 Shipping: 42.5% Margin ($850 profit)

Shipping is an expense that directly cuts into your gross margin. It must be factored in if you provide free delivery.

3. Customer Acquisition (CAC)

If you spend $250 on ads/sales to make each product conversion:

Net Margin Stack:
Net (30%)
Cost (50%)
Ship (7.5%)
CAC (12.5%)
Total cost: $1,400 Net Profit: $600

Factoring in CAC prevents you from overestimating profit. Your true net margin is 30.0% instead of the base 50.0%.

got questions?

Frequently Asked Questions

Everything you need to know about pricing, margins, markups, and profit optimization.

A good profit margin varies significantly by industry. However, as a general benchmark, a 10% net profit margin is considered average, a 20% margin is considered high and healthy, while a 5% margin is on the lower side.

Markup is the percentage added directly to the cost of a product to determine its selling price. Profit margin is the percentage of the selling price that is kept as profit. For example, if an item costs $100 and you sell it for $150, the markup is 50% but the profit margin is 33.3%.

If you offer free shipping to your customers, that expense is deducted directly from your gross revenue, reducing your net profit margin. Factoring shipping fees into your initial product pricing is essential to stay profitable.

CAC represents the average marketing expense incurred to acquire one paying customer. Including CAC in your unit metrics ensures that you do not price products below the threshold needed to cover your advertising expenses.

Margins can be optimized by negotiating bulk purchasing discounts with suppliers to lower unit cost, adding premium features to increase selling price, auditing shipping partnerships to reduce logistics fees, and targeting recurring/organic customer channels to lower CAC.

Gross profit is the amount left after subtracting direct manufacturing or procurement costs (COGS) from sales. Net profit is the final profit remaining after deducting all other operating expenses, including payroll, logistics (shipping), advertising (CAC), software, rent, and taxes.

Not necessarily. While a higher markup yields more profit per unit sold, raising prices too high can drive away price-sensitive customers and lower overall sales volume. The key is finding a balanced price point that maximizes total net revenue.

A negative profit margin means that it costs you more to purchase, advertise, and ship a product than what customers pay to purchase it. This indicates a loss-making model, meaning you need to raise selling price, optimize shipping logistics, or decrease marketing spend immediately.

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