How To Calculate Margin In Excel?

If you are a business owner, it's extremely necessary for you to understand the term margins. Also, you must be familiar with the term profit margin, which is evaluated by subtracting the total costs from total revenue. In short, it is the final profit that you have gained. 

Mainly there are two meanings of “margin” in business; one refers to the markup on the selling price of any product, and the other is the difference between total earnings and costs. On the contrary, in accounting, the margin is mostly mentioned as the latter definition. 

Luckily, this profit can easily be calculated in Microsoft Excel. However, you can also use a profit margin formula which allows you to track how much profit a business is making on each sale.

Keeping track of your expenses and profit is extremely important while running a business. It is because if your profit margins fall from a certain point, it will be impossible for you to make a profit. 

Microsoft Excel has made it relatively convenient to calculate margins. In this blog, we will discuss some easy steps to use a profit margin calculator in Microsoft Excel. We will also highlight some practical examples to understand better how you can utilize them. Let’s walk through some valuable examples of calculating margins in Excel. 

Basics Of Using A Margin Calculator in Excel

For calculating the margin on cost in Excel, it is important to have information about your revenue and total expenses. The simple way to calculate is by using a straightforward formula that includes both the revenue and costs. 

Once you get these two values, enter them in the following formula and calculate the total margin: 

Margin = Revenue - Costs

Let's provide you with an example so that you can understand it better. Let’s say your business has generated $100,000 in revenue and $50,000 in costs in the previous month. 

Enter these values in the above formula and find your total margin. In this example, the final margin would be equal to $50,000.

Margin = $100,000 - $50,000

Calculating Margin In Excel Using A Complex Example:

For example, you have a business with multiple products. Let’s discuss how you can calculate the total margin using the revenues and costs of various products. Suppose there are four products; A, B, C, and D, and the following are their respective revenues and costs:

- Product A: $10,000 in revenue; $5,000 in cost

- Product B: $20,000 in revenue; $10,000 in cost

- Product C: $30,000 in revenue; $15,000 in cost

- Product D: $40,000 in revenue; $20,000 in cost

To calculate the company's overall profit, you need to find the margins of each product separately and later add them up. In this case, the formula would look like this:

Margin = ($10,000 + $20,000 + $30,000 + $40,000) - ($5,000 +$10 000 +$15 000+$20 000) = $100 000 -$50 000= $50 000

So, the company's overall profit will be equal to $50,000. 

Conclusion

The process of calculating margin in Microsoft Excel is pretty convenient. You don’t need to follow any complex steps, simply calculate the total revenues and costs of the whole month and enter those values in the cost formula: Margin= Revenue - Costs. 

Make sure you regularly check the profitability of your business so that you can set the costs accordingly. No matter if you want to calculate the margin on cost or the full profit of the month, Microsoft Excel supports numerous formulas to perform these actions.