Profit margin calculator

Margin is profit as a share of the selling price. Markup is profit as a share of the cost. A product that costs $10 and sells for $25 has a 60% margin and a 150% markup. They describe the same $15, but from opposite ends, and mixing them up is the most common pricing mistake in ecommerce.

Retailers talk in margin because it maps to the money that lands in the bank. Suppliers and wholesalers talk in markup because it maps to the cost they know. When a supplier says "double it" they mean 100% markup, which is a 50% margin.

Gross margin before ads should sit at 50% or above for physical products you ship yourself, 60% to 70% for handmade and private label, and 30% to 40% for dropshipping. Below that, one bad month of ad costs or returns wipes out the profit.

The number that matters is contribution margin: what is left after product cost, shipping, packaging, payment fees and the ad spend that produced the order. Type all five into the calculator and you will usually find your real margin is 15 to 25 points lower than the one on your spreadsheet.

If the margin is below your target, you have four levers: raise the price, lower the cost, cut shipping cost by changing packaging or carrier, or reduce the ad cost per order by improving conversion. The calculator lets you try each one live.

Use the target-margin mode when launching a product: enter costs, type the margin you want, and price from there rather than copying a competitor.