Calculate gross margin and markup from cost and selling price, find the price that hits a target margin, or work backward to find the cost that achieves a target markup. Three calculations in one tool.
Calculate Margin and Markup from Cost and Price
Calculate Selling Price from a Target Margin or Markup
Calculate Required Cost from a Target Margin or Markup
Gross margin and markup both measure the relationship between cost and price, but they use different denominators. Gross margin divides the profit by the selling price and expresses what percentage of revenue is profit. Markup divides the profit by the cost and expresses how much the cost was increased to reach the selling price. A product that costs $30 and sells for $50 has a 40% gross margin and a 66.67% markup -- different numbers describing the same transaction. Gross margin is the standard metric in financial reporting; markup is more common in day-to-day pricing conversations.
Gross margin benchmarks vary significantly by industry. Software and SaaS companies typically run 60 to 85 percent. Professional services typically run 30 to 60 percent. Retail and e-commerce typically run 20 to 50 percent. Restaurants and food service typically run 60 to 70 percent on food cost alone, though overall business margins are much lower after labor and overhead. Knowing your gross margin and comparing it to your industry benchmark tells you whether your pricing and cost structure are competitive or whether there is a structural profitability problem to address.
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