Work out how much you make on a product or service. Enter what it costs you and what you sell it for to see the profit, the margin and the markup — or enter a target margin and get the price you need to charge.
How to use
- Choose whether you know the selling price, or want to find one.
- Enter your cost — everything it takes to make or buy one unit.
- Enter the selling price, or the margin or markup you want.
- Read the profit, margin and markup.
Example
You buy a shirt for Rs 800 and sell it for Rs 1,200. Profit is Rs 400, the margin is 33.3% (400 ÷ 1,200) and the markup is 50% (400 ÷ 800). To make a 40% margin on the same shirt, you'd need to charge Rs 1,333.
Margin and markup are not the same
Margin compares profit with the selling price; markup compares profit with the cost. The same sale always has a higher markup than margin, which is why a “50% markup” only gives a 33% margin. Confusing the two is one of the most common pricing mistakes.
Formulas: Profit = Price − Cost. Margin = Profit ÷ Price × 100. Markup = Profit ÷ Cost × 100. Price for a target margin = Cost ÷ (1 − Margin ÷ 100).
What to include in cost
For an honest number, include everything one sale costs you: the product or materials, packaging, delivery, platform and payment fees, and any sales tax you pay. Leaving costs out makes the margin look better than it is.
Good to know
- A margin of 100% or more is impossible: it would mean the cost is zero or negative.
- This is gross margin for one item. Rent, salaries and other overheads reduce your real profit further.