How it works
How to calculate your profit margin
Enter your cost and selling price
Type in what the product costs you and what you sell it for. Include all costs, not just the wholesale price. Shipping to your warehouse, packaging, and any per-unit fees should be in there.
See margin, markup, and profit
The calculator shows three numbers. Profit margin is the percentage of revenue that is profit. Markup is how much you added on top of cost. Profit per unit is the dollar amount you keep. These are different numbers and they matter for different reasons.
Compare across products
Run the calculation for each product in your catalog. You might discover that your best-selling product has your worst margin, or that a slow mover is actually your most profitable item per sale.
Pricing strategies that protect your margin
Your margin is only as good as your pricing discipline. Here is how to protect it.
Price on value, not just cost-plus
Cost-plus pricing sets a fixed markup and calls it done. But if your product solves a $1,000 problem and costs you $50 to make, selling it for $75 at a 50% markup leaves $925 on the table. Price based on what the customer gets, not just what it costs you.
Watch for margin erosion over time
Supplier costs creep up. Shipping rates increase. You add a free sample to every order. Each small cost increase eats your margin if you do not adjust prices. Review your margins quarterly, not annually.
Use bundles to increase perceived value
Bundle a $40 margin product with a $5 cost accessory and sell the bundle for $10 more. Your margin goes from $40 to $45, a 12.5% increase, and the customer feels like they got a deal. Bundles almost always improve margin.
Do not race to the bottom on price
If your competitor sells at $19.99 and you drop to $18.99, they drop to $17.99, and now you are both making nothing. Compete on reviews, service, speed, or quality instead. A price war has no winners except the customer, and even they lose when the cheap sellers go out of business.
Know your floor price
Before you ever run a sale or negotiate a deal, know the absolute lowest price where you still make money. Factor in cost of goods, shipping, transaction fees, and returns. A 20% off sale on a product with 25% margin leaves you with 5%. Is that enough?
Anchor high, then offer value
Pricing psychology says people judge prices relative to the first number they see. Show your premium option first. A $299 plan makes the $149 plan feel like a deal, even if $149 was your target price all along. The anchor changes the perception.
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Questions, answered
It depends entirely on your industry. Online retail typically aims for 40% to 60% gross margin. Grocery is 1% to 3% net. SaaS is 70% to 85% gross. A 30% gross margin is excellent for a hardware company but terrible for a software company. Compare against your industry, not a generic benchmark.
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. A product that costs $60 and sells for $100 has a 40% margin and a 66.7% markup. They describe the same profit differently. Financial reports use margin. Purchasing teams often use markup.
Margin = markup / (1 + markup). So a 100% markup gives you 100/200 = 50% margin. A 50% markup gives you 50/150 = 33.3% margin. The formula works the other way too: markup = margin / (1 - margin). A 40% margin requires a 66.7% markup.
Yes if you are trying to get an accurate margin. Your real cost per unit includes the product cost, inbound shipping to your warehouse, packaging, and any per-unit fees like pick and pack. Only counting the wholesale price overstates your margin and can lead to underpricing.
Common culprits are rising supplier costs, more discount codes being used, higher shipping costs, increased return rates, or a shift in product mix toward lower-margin items. Run this calculator for each product individually and check if the margin has actually changed or if your sales mix shifted.
The traditional retail rule of thumb is keystone pricing, which is a 100% markup or 50% margin. Buy at $25, sell at $50. But it varies. Fashion and accessories often mark up 150% to 300%. Electronics might only mark up 5% to 20%. Your markup needs to cover overhead and still leave profit.
Not necessarily. A product with 80% margin that sells 10 units earns less total profit than a product with 20% margin that sells 1,000 units. Total profit is margin times volume. Some of the biggest businesses in the world run on thin margins and massive volume. Think Amazon or Costco.
They reduce it directly. If you sell a $50 product with a $20 cost (60% margin) and Stripe takes $1.75 per transaction, your real margin drops to 56.5%. On low-price items, payment processing fees can eat 5% to 8% of your revenue. Factor them into your cost when calculating margins.
Reviews protect your margins
Products with strong reviews command higher prices because customers trust them more. WiserReview helps you collect and display reviews that justify premium pricing and protect your margins.
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