Markup and Margin Calculator
The Markup and Margin Calculator estimates profitability metrics like profit amount and percentages based on cost price and selling price. This calculator helps small business owners and retailers determine the best price points to maximize profits. Whether you're setting new product prices, checking existing profit margins, or planning pricing strategies, this tool provides quick and accurate financial insights.
How Profitability Metrics Are Calculated
Profitability metrics show the true earning power of your products by comparing the cost to acquire goods with the final selling price. The calculation begins by finding the gross profit, which is the simple difference between what you sell an item for and what it cost you.
Profit = Selling Price - Cost Price
Markup % = (Profit / Cost Price) × 100
Margin % = (Profit / Selling Price) × 100
Where:
- Cost Price = The amount you paid to buy or make the product
- Selling Price = The amount you charge the customer
- Profit = The money left over after the sale
First, subtract the cost from the selling price to find the dollar amount of profit. Next, divide that profit by the cost to get markup, or by the selling price to get margin. Finally, multiply by 100 to convert the decimal into a percentage. This method helps you distinguish between profit on cost versus profit on revenue, ensuring accurate financial planning.
What Your Profitability Metrics Mean
Your results show exactly how much money you keep from every sale after paying for the product, which is vital for keeping your business running.
Maintaining Healthy Margins: A margin above 30% is generally considered healthy for most retail and service businesses. This percentage provides enough room to cover your operating expenses, such as rent and payroll, while still generating net income.
Setting Pricing Strategies: If your markup is below 50%, you may have limited room for discounts or promotions. Use the calculator to see how increasing your price affects your overall profit percentage without alienating customers.
Analyzing Product Viability: If your margin is below 10%, you need to sell a very high volume of goods to make a profit. This metric helps you decide if a low-margin product is worth the shelf space and effort.
Important
Remember that markup and margin are different; confusing them often leads to underpricing and lost revenue.
This tool is for educational purposes only and does not constitute professional financial advice. Always consult a qualified financial advisor or accountant to verify your pricing strategy and ensure compliance with local business regulations.
Review these numbers whenever your supplier costs change to keep your profits safe.
Calculation logic verified using publicly available standards.
View our Accuracy & Reliability Framework →