What is a Profit Margin Calculator?
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. They describe the same rupees and produce different percentages, and confusing the two is the most expensive arithmetic mistake in small business pricing.
Enter the cost and the selling price and the tool returns both percentages and the profit per unit.
A fifty percent markup is a thirty three percent margin. If a supplier quotes markup and your accountant works in margin, every price in the spreadsheet is wrong in the same direction, and the error compounds across the catalogue. Checking which one a number refers to takes seconds and is worth doing every time.
Frequently asked questions
What is the difference between margin and markup?
Margin divides profit by the selling price. Markup divides profit by the cost. On an item costing 100 sold at 150, the profit is 50, the markup is 50 percent and the margin is 33.33 percent.
How do I price for a target margin?
Divide the cost by one minus the margin expressed as a decimal. For a forty percent margin on a cost of 600, divide by 0.6 to get 1000. Adding forty percent to the cost gives 840, which is a forty percent markup and only a 28.6 percent margin.
Should GST be included in the price here?
Work in pre-tax figures on both sides. GST is collected on behalf of the government and is not revenue, so including it in the selling price overstates the margin.
What is a good margin?
It varies enormously by industry, so the useful comparison is against your own history and your sector rather than a general figure.