Work out your profit margin and markup from cost and selling price, or find the selling price you need to hit a target margin or markup. Margin and markup are often confused, and the difference can cost you real money.
1. I know my cost and selling price
2. I know my cost and want a margin
3. I know my cost and want a markup
Use any currency. This tool does not include tax, shipping or other costs, so add those to your cost first.
The formulas
- Profit = selling price minus cost
- Profit margin = profit divided by selling price, times 100
- Markup = profit divided by cost, times 100
- Price for a target margin = cost divided by (1 minus margin)
- Price for a target markup = cost times (1 plus markup)
Example
A product costs 60 and sells for 100. Profit is 40. The margin is 40% (40 divided by 100) and the markup is about 66.7% (40 divided by 60). A 40% markup on a cost of 60 would give a price of only 84, which is a margin of about 28.6%. That is why mixing up the two is risky.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. For the same sale, markup is always the larger number.
What is a good profit margin for a small business?
It depends on your industry. Retail often runs lower and digital products or services can be much higher. Compare with similar businesses and make sure your margin covers all costs, including your time.
Should I include tax in the cost?
No. Leave out sales tax or VAT you collect for the government. Include costs such as materials, packaging, shipping, fees and ads that are part of making the sale.
Free download: Want ready-to-use AI prompts? Get our free prompt guides for teachers, engineers and small business owners. More free tools are on the free tools page.