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Profit Margin

Understand profit as a share of your revenue.

01

Let’s work it out.

Start with the example, or make it your own.

02EXAMPLE RESULT

Profit margin

35
%
Profit3,500currency units
Revenue10,000currency units
Markup53.846154%

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THE THINKING BEHIND THE ANSWER

How this calculation works

Margin divides profit by revenue. Markup divides profit by cost, so the two percentages are different. Include the relevant costs for the kind of margin you want to measure.

Profit margin = (revenue − costs) ÷ revenue × 100

Your calculation, step by step

  1. Profit = 10,000 − 6,500 = 3,500.
  2. Margin = 3,500 ÷ 10,000 × 100.
A worked example

10,000 revenue and 6,500 costs produce a 35% margin.

A few good places to start

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