How to use the Profit Margin & Markup Calculator
- Enter what the item costs you, including purchase price and any direct costs such as packaging or delivery.
- Enter the price at which you sell it. Use the price before GST so the figures stay consistent.
- Read the profit, the margin and the markup.
- Use the reference table to see which markup gives which margin, and price new items accordingly.
Formula used
Profit = Selling price − Cost. Margin % = Profit ÷ Selling price × 100. Markup % = Profit ÷ Cost × 100.
Worked example
Here is the Profit Margin & Markup Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Cost price | ₹800 |
| Selling price | ₹1,000 |
| Result | |
| Profit (or loss) | ₹200 |
| Profit margin (on selling price) | 20% |
| Markup (on cost price) | 25% |
Markup to margin reference
A markup always gives a smaller margin, because margin is measured on the higher selling price.
| Markup on cost | Profit margin |
|---|---|
| 10% | 9.09% |
| 20% | 16.67% |
| 25% | 20% |
| 30% | 23.08% |
| 50% | 33.33% |
| 100% | 50% |
Margin versus markup
Profit is selling price minus cost. Margin expresses profit as a percentage of the selling price, and markup expresses it as a percentage of the cost. With a cost of ₹800 and a selling price of ₹1,000, the profit is ₹200. The margin is 200 ÷ 1,000 = 20%, and the markup is 200 ÷ 800 = 25%.
The two always differ for any non-zero profit. Markup is always larger than margin, because the same profit is divided by the smaller number, the cost.
How to set a price from a target margin
If you know the margin you want, divide the cost by (1 − margin). For a 20% margin on a ₹800 cost, the price is 800 ÷ 0.8 = ₹1,000. Many people wrongly add 20% to the cost and get ₹960, which gives a margin of only 16.67%.
If you work with markup, the price is cost × (1 + markup). A 25% markup on ₹800 gives ₹1,000.
Gross, operating and net profit
This calculator treats the cost as the direct cost of the item, which gives a gross margin. Your business also pays rent, salaries, marketing, platform fees and taxes, and these reduce the profit that finally reaches you. A product with a 30% gross margin may leave only a small net margin once those costs are paid.
Track these costs separately and make sure your margin leaves room for them.
Selling at a loss
If the selling price is below cost, the profit is negative and so are the margin and markup. For example, selling at ₹700 an item that costs ₹800 gives a loss of ₹100, a margin of -14.29% and a markup of -12.5%.
Discounts can turn a profitable item into a loss maker quickly, so check the margin before you offer a sale.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit divided by selling price. Markup is profit divided by cost. A 25% markup equals a 20% margin.
How do I calculate profit margin?
Subtract the cost from the selling price, divide by the selling price and multiply by 100.
Should I enter prices with GST?
Enter prices without GST for both cost and selling price, so tax does not distort the result.
What is a good profit margin?
It depends on the industry. Grocery margins are thin and software margins are high. Compare with similar businesses.
Can the margin be more than 100%?
No. Margin cannot exceed 100% because profit cannot be larger than the selling price. Markup can exceed 100%.
How do I find the selling price from a markup?
Multiply the cost by (1 + markup as a decimal). For a 40% markup on ₹500, the price is ₹700.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.