Profit Margin Calculator

A profit margin calculator shows how much of a sale price you actually keep. It takes the cost of delivering a job and the price you charge for it, and returns three numbers: the gross profit in pounds, the margin as a percentage of the sale price, and the markup as a percentage of the cost. Margin and markup are frequently confused, and confusing them is how a job that felt profitable turns out not to be.

• Gross profit is the sale price minus the cost price.
• Margin is gross profit divided by the sale price, expressed as a percentage.
• Markup is gross profit divided by the cost price, expressed as a percentage.
• The same job can show a 33% margin and a 50% markup, because the two are measured against different denominators.

1. Enter the full cost of delivering the job: labour, materials, plant, subcontractors and any direct site costs.
2. Enter the price you charge the customer, excluding VAT.
3. Read the gross profit, margin and markup, then adjust the sale price until the margin is one you can live with.

An electrical contractor prices a lighting upgrade that costs 400 to deliver and sells for 600.

• Gross profit: 600 - 400 = 200.
• Margin: 200 / 600 = 33.33%.
• Markup: 200 / 400 = 50%.

A 50% markup produces a 33.33% margin. Adding 33% to cost instead would have priced the job at 532 and cut the margin to 24.8%.

Gross margin is not profit in your pocket. It covers your overheads first: premises, vehicles, insurance, admin and everything else that runs whether or not you win the job. Compare the margin against the overhead recovery you need across a year, and remember that the figures here exclude VAT, which is never yours to keep.

Competitive tendering puts steady downward pressure on price, and the only defence is knowing precisely where your floor is. Buyers also scrutinise unusually low bids, so a price you cannot sustain can cost you the contract as well as the money. Checking margin before submission keeps you from winning work you would rather have lost.

What is the difference between margin and markup?

Margin measures profit against the sale price. Markup measures the same profit against the cost. Markup is always the larger number.

What is a good profit margin?

It varies widely by sector, from low single digits in high-volume supply to well above 30% in specialist services. Compare against your own overhead recovery rather than a general benchmark.

Should I include VAT in these figures?

No. Work in net figures. VAT is collected on behalf of HMRC and does not belong in a margin calculation.

Does this include overheads?

Only if you enter them in the cost figure. By default it gives gross margin, which is the profit available to cover overheads.