Add your revenue and costs to get your gross margin and markup. Add operating costs and ad spend for your net margin, or work backwards from a target margin to a price.
Profit margin is profit divided by revenue, as a percentage. Sell for £100 with £40 of costs and you keep £60, a 60% gross margin. Markup divides the same £60 by cost instead, so it is 150%. Service businesses commonly run higher gross margins than product businesses.
Who this is for: Coaches, consultants, service businesses and shops checking whether their prices leave enough room.
Take your revenue, subtract your costs, then divide what is left by the revenue. Multiply by 100 for a percentage.
Profit margin = (revenue minus costs) ÷ revenue × 100
Which costs you subtract decides which margin you get. Take off only the direct cost of making or delivering what you sold and you get gross margin. Take off everything, including pay, rent, software and ads, and you get net margin.
A coach who brings in £10,000 in a month and spends £3,000 delivering it has a gross profit of £7,000, a 70% gross margin. If operating costs are £2,500 and ad spend is £1,500, net profit is £3,000, a 30% net margin.
Both start from the same profit. Margin divides it by the price. Markup divides it by the cost. So the same sale always shows a bigger markup than margin, and mixing them up is one of the most common pricing mistakes.
| Cost | Price | Profit | Margin | Markup |
|---|---|---|---|---|
| £80 | £100 | £20 | 20% | 25% |
| £67 | £100 | £33 | 33% | 50% |
| £50 | £100 | £50 | 50% | 100% |
| £40 | £100 | £60 | 60% | 150% |
| £25 | £100 | £75 | 75% | 300% |
If you add a 50% markup thinking it gives you a 50% margin, you actually get 33%. Margin can never reach 100%. Markup has no ceiling.
It depends heavily on what you sell. The ranges below are rough guides that are commonly cited, not precise benchmarks. Your industry, size and pricing model can move them a lot.
| Type of business | Gross margin, rough guide | Net margin, rough guide |
|---|---|---|
| Coaching, consulting, digital programmes | 70% to 90% | 20% to 40% |
| Agencies and done-for-you services | 40% to 60% | 10% to 20% |
| Physical products, e-commerce | 30% to 60% | 5% to 15% |
| Resale with little added value | 15% to 30% | 2% to 8% |
For a service business, a gross margin under about 40% usually means delivery costs too much for the price. For a product business, under about 25% leaves very little room to pay for ads.
Divide your cost by one minus the margin you want:
Price = cost ÷ (1 minus target margin)
Check it: £100 minus £40 is £60, and £60 is 60% of £100. The price finder in the calculator does this for you. For coaching and consulting, cost is only the floor. Our guide on how to price your offer covers pricing on the outcome instead.
For service businesses, a thin margin rarely comes from delivery alone. In our experience it is usually one of these:
For product businesses, check discounting, supplier costs and shipping first, then ad costs.
No. Both use the same profit, but margin divides it by the price and markup divides it by the cost. A £100 sale that costs £40 has a 60% margin and a 150% markup.
Gross margin only takes off the direct cost of making or delivering what you sold. Net margin takes off everything else too, including pay, rent, software and ad spend, so it is always lower.
No. Margin is profit as a share of revenue, so even with zero costs it tops out at 100%. Markup can go far above 100%, which is one reason people confuse the two.
As a rough guide, coaching and consulting commonly run gross margins of 70% to 90% because delivery costs little. Net margin depends on your pay, overheads and how much it costs to win each client.
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