Margin and markup are the two most misunderstood numbers in small business pricing. Use this calculator to work out the profit you make on every sale, or to find the selling price you need to reach the margin you want.
Margin and markup are not the same thing
Profit margin tells you what share of the selling price is profit. Markup tells you how much you added on top of your cost. A product that costs Rs 600 and sells for Rs 900 earns Rs 300. That is a 33.33% margin because 300 is a third of the 900 you charged, but it is a 50% markup because 300 is half of the 600 it cost you. Mixing the two up is the most common reason a business prices too low.
The formulas
- Profit = selling price – cost price
- Profit margin (%) = profit / selling price x 100
- Markup (%) = profit / cost price x 100
- Selling price for a target margin = cost price / (1 – target margin)
Worked example
The calculator opens with a cost of Rs 600 and a selling price of Rs 900. Profit per unit is Rs 300, the margin is 33.33% and the markup is 50%. If you instead want a 40% margin on the same Rs 600 cost, switch to the second option: 600 / (1 – 0.40) gives a selling price of Rs 1,000, which is a markup of about 66.67%.
How to use the result
Margin should cover more than the cost of the product. Before you settle on a price, remember to leave room for marketing, payment fees, returns, rent and your own time. If the margin looks healthy on paper but the business still feels tight, the break-even calculator on this site will show how many sales you need each month to cover your fixed costs.
Frequently asked questions
Is a higher markup always better?
Not necessarily. A higher markup raises the price, which can reduce how many units you sell. The right price balances margin against volume, and the break-even calculator helps you test both sides.
Should I price using margin or markup?
Many retailers think in markup because it is easy to add a percentage to cost. Many investors and finance teams read margin because it compares directly with revenue. Know both, and be clear which one you are quoting.
Does this include GST?
No. Enter cost and selling price on the same basis, either both with GST or both without. For GST-inclusive figures, use the GST calculator first.
This calculator is provided for general information and planning only. It is not accounting, tax, legal or investment advice, and the results depend entirely on the numbers you enter. Please confirm important figures with a qualified professional.