Margin Calculator

Margin and markup are not the same

Both describe the gap between what something costs you and what you sell it for, but they divide by different numbers, and confusing them is one of the fastest ways to price a product into a loss. Margin is profit as a share of the selling price. Markup is profit as a share of the cost. Markup is always the larger figure, and the gap widens as profitability rises.

The formula behind it

Profit is price − cost. Margin is profit ÷ price × 100 and markup is profit ÷ cost × 100. Buy at 60 and sell at 100: profit is 40, margin is 40% and markup is 66.7%. A 50% markup is only a 33.3% margin — so a retailer aiming for a 50% margin who applies a 50% markup will fall a third short of the target on every unit sold.

How to use this calculator

Enter the cost of the item and your selling price. The result shows the profit, the margin percentage and the markup percentage together, which is exactly what you need when quoting a price or checking a supplier's terms.

Using it to set prices

To hit a target margin, divide the cost by (1 − margin): a 40% margin on a cost of 60 needs a price of 60 ÷ 0.6 = 100. Remember that this is gross margin — it covers the product only, not rent, wages, shipping or returns, all of which come out of it. Businesses with high overheads need considerably higher gross margins to end the year in profit.