Calculate Profit Margin and Markup From Revenue and Costs
Enter revenue, direct costs and operating overhead. The tool shows profit as a share of revenue and markup as a share of cost, making two commonly confused percentages explicit.
Read profit, margin and markup correctly
The default example compares $20,000 revenue with $12,000 of total entered costs.
- Profit margin
- 40.0%
- Markup on total cost
- 66.7%
- Total entered costs
- $12,000
Keep margin and markup from being mistaken for each other
Calculate freelance or small-business profit, margin and markup from revenue, direct costs and operating overhead.
Set a quote through the project fee calculator and test the revenue floor with the break-even calculator.
Use one period and complete costs
Match revenue and costs
Do not compare annual overhead with one month's revenue.
Separate drawings from expense
Owner withdrawals do not automatically reduce business profit.
- Calculation method
- Profit equals revenue minus costs; margin divides profit by revenue; markup divides profit by cost.
- Best used for
- Reviewing a project, service period or small-business revenue scenario.
- Keep outside the result
- Personal tax, owner drawings, cash timing, capital expenditure and unpaid invoices.
Margin answers a revenue question
It shows how much of each revenue dollar remains after the entered costs.
Markup answers a cost question
It shows profit relative to the cost base. Applying a forty percent markup does not create a forty percent margin.
Reconcile profit with records
Connect revenue to invoices and receipts, and costs to their business purpose and evidence.
Read profit, margin and markup correctly in a worked example
The default example compares $20,000 revenue with $12,000 of total entered costs. Revenue minus direct cost and overhead produces operating profit. Margin divides that profit by revenue, while markup divides it by total cost, so the two percentages answer different questions. Keep revenue and expenses in the same period before comparing performance.
- Revenue for the period
- $20000
- Direct costs
- $7000
- Operating overhead
- $5000
Estimated operating profit: $8,000
Use consistent recognition and classification before comparing one period with another.
- Profit margin
- 40.0%
- Markup on total cost
- 66.7%
- Total entered costs
- $12,000
Calculation rule: Profit equals revenue minus costs; margin divides profit by revenue; markup divides profit by cost. Boundary: Personal tax, owner drawings, cash timing, capital expenditure and unpaid invoices.
Profit-margin questions
Are margin and markup the same?
No. Margin uses revenue as the denominator; markup uses cost.
Can profit be negative?
Yes. A loss produces a negative margin; the page displays the signed result.
Does cash in the bank equal profit?
No. Timing, unpaid invoices, liabilities and owner movements can differ.
Connect pricing, cost and usable owner income
Track salary, freelance, rental and business income with source-level records, cash timing, direct costs and a separate tax reserve.