How to Calculate Margin in Excel (Formula + Example)

Profit margin tells you what percentage of your revenue is actually profit after costs. Excel calculates it in one formula — no separate add-in or complex model required — as long as you know your revenue and your cost.

This guide from Anchor AI Tools covers the exact formula, the difference between margin and markup (a mix-up that leads to real pricing mistakes), and a worked example across multiple products.

The Margin Formula

In plain terms: Margin % = Profit ÷ Revenue. It answers "of every dollar I bring in, how much is actually profit?" — which is different from asking how much profit is relative to cost (that's markup, covered below).

Step-by-Step in Excel

1. Enter revenue in one column. For example, selling price in column B.
2. Enter cost in the next column. Cost of goods sold in column C.
3. Subtract cost from revenue, then divide by revenue. =(B2-C2)/B2.
4. Format the result as a percentage. Select the cell, then Home → Number Format → Percentage, or press Ctrl+Shift+%.

Worked Example

A small retailer wants to check the margin on three products.

Even though Product C brings in less revenue than Product A or B, it has by far the best margin — 60% of every dollar it earns is profit, compared to 25% for Product B. Margin often tells a different story than revenue alone.

Gross Margin vs. Net Margin

Gross margin is useful for pricing individual products. Net margin gives the full picture of business profitability once every expense is accounted for — the two numbers can look very different for the same business.

Margin vs. Markup — Don't Confuse Them

Margin and markup use the same two numbers — revenue and cost — but divide by a different base, and mixing them up is one of the most common small-business pricing mistakes.

Using the Product A example above ($80 revenue, $50 cost, $30 profit): margin is 30 ÷ 80 = 37.5%, but markup is 30 ÷ 50 = 60%. Pricing a product to hit a "50% margin" by simply adding 50% to cost actually only produces a 33.3% margin — a mistake that quietly erodes profitability across every sale.

Common Mistakes to Avoid

Dividing by cost instead of revenue. This calculates markup, not margin — the two numbers are not interchangeable, and using the wrong one in a pricing decision compounds across every sale.

Forgetting to format as a percentage. A margin formula without percentage formatting shows a confusing decimal like 0.375 instead of 37.5%.

Mixing gross and net margin without labeling which one you mean. A "40% margin" claim is meaningless without specifying gross or net — they can differ substantially.

Using negative or zero revenue. If revenue is zero, the formula returns a #DIV/0! error — wrap it in IFERROR if you're calculating margin across many rows that might include blanks.

Who Needs to Calculate Margin in Excel?

This comes up constantly for small business owners setting or reviewing prices, freelancers and agencies checking project profitability, e-commerce sellers comparing product performance, and finance teams building pricing or budgeting models.

Also checking a typical value in your sales data? See our guide on how to calculate median in Excel. Need a quick percentage calculation instead of a full spreadsheet? Try our percentage calculator.

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