Profit margin calculatorProfit, margin and markup, and the price that hits your target
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To make a 30% margin on this cost, charge $928.57
Profit margin
35.0%
- Profit
- $350.00
- Markup on cost
- 53.8%
- Status
- Healthy
A solid cushion against scope creep and surprises.
The formulas
margin = (price − cost) ÷ price
markup = (price − cost) ÷ cost
price for a target margin = cost ÷ (1 − target)
Charge $5,000 for work that costs you $4,200 and you make $800, a 16% margin and a 19% markup. To reach 25%, charge 4,200 ÷ 0.75 = $5,600. Note that a 25% markup only gets you a 20% margin, which is why it pays to price on margin.
Margin is a pricing decision
Agencies most often lose money by quoting on gut feel and finding the margin after the project ends. Start from your real hourly rate, set a target margin and price up from cost. In Tillage, every quote shows variance and margin on each line before you send it.
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Profit margin questions
How do you calculate profit margin?
Profit margin is profit divided by price. Subtract your cost from your price to get profit, divide by the price and multiply by 100. A project you charge $1,000 for that costs you $650 makes $350 profit, a 35% margin.
What’s the difference between margin and markup?
Margin is profit as a percentage of your price. Markup is profit as a percentage of your cost. $650 of cost sold for $1,000 is a 35% margin but a 54% markup. Same dollars, two angles: quote on margin so you always know what you keep.
What is a good profit margin for an agency or service business?
Many healthy service businesses aim for 20% to 40% on project work. Under 20% leaves little room for scope creep or a slow month. The right number depends on your overhead, so set a target margin and price from it rather than guessing.
How do I price a project to hit a target margin?
Divide your cost by one minus the target margin. For a 30% margin on $650 of cost, charge $650 ÷ (1 − 0.30) = $928.57. The calculator above does this when you enter a target margin.
