Profit margin calculator: which margin are you quoting?
Profit margin is not one number. It is a ladder: margin on the supplier invoice, margin after landed cost, margin after fulfilment and fees, and margin after marketing. Put in one order and read all four, as margin and as markup.
What the customer is charged before any discount. Use average order value for a whole-store read.
Codes and markdowns. Every margin below is computed on the price after discount.
The invoice cost of the goods in the order, ex-factory.
What it cost to land those goods at your warehouse. Supplier cost plus this is landed COGS.
Pick, pack, packaging and outbound postage for the order.
Card and platform transaction fees, as a share of the discounted price.
Ad spend divided by orders in the same period.
You keep A$21.75 of a A$90.00 order after every variable cost. Quote the 66.7% gross figure instead and you overstate what the order earns by 42.5 points.
Four rungs, one denominator
Every rung subtracts one more group of costs that move with the order, and every margin is divided by the same thing: the price the customer actually paid. Markup divides the same profit by the costs taken out so far.
The rungs follow the step-down on CM1, CM2 and CM3. Some operators number the rungs differently; state the convention you use and most margin arguments disappear.
A A$100.00 order with a 10% discount brings in A$90.00. Take off the A$30.00 supplier cost and A$60.00 remains, a 66.7% gross margin. Add A$6.00 of freight-in and duty and CM1 is A$54.00, or 60%.
Fulfilment of A$12.00 and A$2.25 of payment fees bring CM2 to A$39.75. Then A$18.00 of marketing leaves CM3 at A$21.75: 24.2% of the price paid, and a 31.9% markup on the A$68.25 of costs behind it.
These are your live inputs from the calculator above, not a canned example. Change a number up there and these paragraphs follow.
Questions operators ask
There is no single good number: it depends on which rung you quote and what you sell. The useful test is CM3. If it stays positive on the orders you buy with ads, growth adds profit. If it is negative, more volume makes the loss bigger. See why revenue can rise while profit does not.
Same profit, different denominator. Margin divides profit by the price paid; markup divides it by cost. In the default example, CM1 of A$54 is a 60% margin on the A$90 price and a 150% markup on the A$36 landed cost. Margin can never reach 100%, markup has no ceiling. The margin vs markup converter switches between the two.
After. The discount never reached your bank account, so a margin worked on the full ticket price is worked on money you did not receive. This calculator applies the discount first and divides every rung by the price actually paid. If codes are a large share of your sales, the discount code problem shows where that margin goes.
Below CM3. Rent, salaries and software do not move with each order, so they are paid out of the combined contribution of all orders. CM3 is managed order by order, while net margin is read on the monthly P&L. The break-even units calculator shows how many orders it takes to cover the fixed costs.
Related: CM1Contribution marginWhere margin leaksContribution margin calculatorLanded COGS calculatorAll free tools →
The same ladder, on every order
This page runs one example order. Blufire computes this per order, customer and SKU, reconciled to your ledger, and traces any period's margin move through the CM waterfall and bridge.