How to use this tool
- Choose whether you know the selling price or want a price for a target margin.
- Enter your cost (and the selling price or target margin).
- Read the margin, markup and gross profit. Use the same currency for every figure.
Margin vs markup
Both compare profit with something else. Margin compares profit with the selling price, so it can never reach 100%. Markup compares profit with cost, so it can be any size. Shops and wholesalers often quote markup; accounts and investors use margin. Mixing them up is one of the most common pricing mistakes: adding a 30% markup gives only a 23% margin.
| Markup | Margin |
|---|---|
| 20% | 16.7% |
| 25% | 20% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
Formulas
Gross profit = price − cost. Margin = profit ÷ price × 100. Markup = profit ÷ cost × 100. Price for a target margin = cost ÷ (1 − margin). Price for a target markup = cost × (1 + markup).
Tax
Use prices without sales tax, VAT or GST, because the tax is passed on to the government rather than kept as profit. The VAT and GST calculator can strip tax from a price first.
Frequently asked questions
What is a good profit margin?
It varies by trade. Grocery retail often runs on 2–5% net margin, while software and services can exceed 20%. Compare with businesses like yours.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup is a 33.3% margin.
How do I calculate selling price from cost and margin?
Divide cost by (1 − margin). Cost 75 at a 25% margin: 75 ÷ 0.75 = 100.
Is this gross or net margin?
Gross margin, using only the cost of the item. Net margin also subtracts rent, wages and other overheads.