Profit margin calculator
Enter a selling price and what the product costs you. Add shipping, fees and ad cost to see what each sale really leaves.
Formula
Gross margin = (price − product cost) ÷ price × 100
Net margin subtracts every other cost too: net margin = (price − product cost − other costs) ÷ price × 100. Margin is always a share of the price, never of the cost.
How to calculate profit margin: a worked example
A candle sells for $40 and costs $14 to make. Each order also carries $12 of shipping, payment fees and ad cost.
- Gross profit = $40 − $14 = $26
- Gross margin = $26 ÷ $40 = 65%
- Net profit = $26 − $12 = $14, a 35% net margin
The candle keeps 65 cents of each dollar before other costs and 35 cents after them.
What is a good profit margin?
Your gross margin has to cover everything an order costs beyond the product, then leave the profit you want. Gross margin needed = (shipping + fees + ad cost per order) ÷ price + target net margin.
For the candle, $12 of costs on a $40 sale is 30%. Add a 10% profit target and the floor is a 40% gross margin; at 65% there's room to spend more on ads.
Questions about profit margin
- What's the difference between margin and markup?
- Margin is profit as a share of the price; markup is profit as a share of the cost. A $15 item sold for $30 has a 50% margin and a 100% markup. Use the markup calculator to convert one to the other.
- Should ad spend count in gross margin?
- No. Gross margin covers only what the product costs. Ad spend, shipping and fees belong in contribution margin or net margin, which is why a store can have a healthy gross margin and still lose money on paid orders.
- How do I raise my margin without raising prices?
- Sell more per order with bundles and kits, which spread shipping and fees across more items. Renegotiate unit costs once volume grows, and steer traffic to the products with the highest margins.
Do it with Replo
See margin by product, not by guess
Replo reads your Shopify orders and costs and shows which products earn the most on each sale.
Prompt: “show gross margin by product from my Shopify orders”