Free pricing calculator
Measure the gross profit inside your current price, translate between markup and margin, and find the selling price that actually reaches your target.
Quick answer
Margin divides gross profit by the selling price. Markup divides it by direct cost. Because the denominators differ, the percentages are not interchangeable: a 50% markup produces a 33.3% gross margin.
Gross margin = (selling price − direct cost) ÷ selling price
Target price = direct cost ÷ (1 − target margin)
Reviewed August 15, 2026
Step 1
This is a gross-margin calculation. It does not subtract overhead, owner pay, taxes, financing costs, or other expenses that determine net business profit.
The denominator changes the answer
Markup measures gross profit against cost. Margin measures the same gross profit against the customer's price. Because the denominators differ, the percentages are not interchangeable.
If a sale costs $60 to deliver and sells for $100, gross profit is $40. That is a 66.7% markup on cost but a 40% gross margin on revenue.
Review the exact formulas →Use the number correctly
Include costs that change with one additional sale: direct labor, materials, subcontractors, transaction fees, fulfillment, shipping, and similar delivery costs. Do not quietly omit your own delivery labor because no invoice arrives for it.
No. Gross margin subtracts the direct cost of the sale. Net margin also reflects overhead, owner compensation, taxes, interest, and other business expenses. A healthy-looking gross margin can still produce a weak or negative net result.
The cost portion remains fixed while the target profit becomes a larger share of the final price. A 50% gross margin means cost can consume only half of revenue, so the selling price must be twice the direct cost.
Treat it as an economic requirement, not proof the market will accept the price. Pressure-test customer value, positioning, alternatives, demand, and whether the cost estimate is complete. If the market rejects the price, the real options are to lower cost, change the offer, accept a lower margin knowingly, or stop selling that work.
No. Use the pre-tax selling price and direct cost. Taxability and collection rules depend on the transaction and location; add applicable tax separately using qualified guidance.
