What profit margin should I charge?
There is no single margin that is right for every business. A useful approach is to choose a target based on your costs, market, overhead and required profit, then test whether your price or revenue can support it. NumLuma shows the current margin and what would need to change to hit the target.
Run the scenario.
The calculator is prefilled with the example above. Change any input and the result updates immediately in your browser.
- Margin is profit divided by revenue, not profit divided by cost.
- A target margin should leave room for the costs that are not included in the input.
- Raising price, reducing cost or changing the product mix can move margin in different ways.
- A high margin is not automatically a better business if volume or retention falls.
Use a target, not a universal benchmark
Industry averages can be useful context, but they do not know your overhead, customer acquisition cost, returns, taxes or competitive position. Treat a target margin as a planning constraint rather than a universal score.
The simulator below calculates the revenue needed to hit the target at the current cost and also shows the maximum cost compatible with that target at the current revenue.
Margin and markup are different
A 40% margin does not mean adding 40% to cost. Margin uses revenue as the denominator, while markup uses cost. Confusing the two can produce a selling price that misses the intended profitability.
If your pricing process starts from cost, use the target-margin relationship rather than simply adding the same percentage to cost.
Quick questions.
Is a 40% margin good?
It can be strong or weak depending on the business model and which costs are included. The number needs context.
Does this include taxes and overhead?
Only if you include them in the cost input. Be consistent about what cost means when comparing scenarios.
Read the answer. Inspect the standard.
This page is connected to a working calculator, visible formula and public editorial policy. “NL Verified” refers to engineering checks, not external professional review.
Use the full calculator when the answer needs more depth.
Compare scenarios, show the math, save the state and export the result.