How margin is calculated
Profit margin
Profit ÷ selling price × 100. Cost 70 and price 100: profit 30, margin 30%.
Markup
Profit ÷ cost × 100. Same example: 30 ÷ 70 = 42.86%.
Price for a target margin
Cost ÷ (1 − margin). For 30% on a cost of 70: 70 ÷ 0.7 = 100.
Margin vs markup
To earn the margin in the first column, add the markup in the second. The last column is the price for an item that costs 100.
| Margin | Markup on cost | Price for cost 100 |
|---|---|---|
| 10% | 11.11% | 111.11 |
| 20% | 25% | 125.00 |
| 25% | 33.33% | 133.33 |
| 30% | 42.86% | 142.86 |
| 40% | 66.67% | 166.67 |
| 50% | 100% | 200.00 |
FAQ
What’s the difference between margin and markup?
Margin divides profit by the selling price; markup divides it by the cost. So adding 30% to the cost gives only a 23.08% margin, a common pricing mistake.
Should I use the price including VAT?
No. If you’re VAT-registered, the VAT goes to the tax authority, so the margin belongs on the price before VAT. Tick “includes 15% VAT” and we handle it.
What goes into cost?
Everything you pay per item: purchase price, shipping to you, packaging, marketplace or payment fees. The result is your gross margin, before rent and salaries.
How do I price for a 25% margin?
Divide the cost by 0.75. An item costing 60 sells for 80 for a 25% margin.