In this article
Profit margin tells you what share of the selling price is profit. Markup tells you how much you added on top of the cost. They use the same two numbers, cost and selling price, but divide by different things, so the same sale shows a margin of 25% and a markup of 33%. Mixing them up is one of the commonest pricing mistakes.
The formulas, step by step
- 1Find the profit₹800 − ₹600 = **₹200**.
- 2Margin on the selling price₹200 ÷ ₹800 × 100 = **25.00%**.
- 3Markup on the cost₹200 ÷ ₹600 × 100 = **33.33%**.
- 4Price for a 30% margin₹600 ÷ (1 − 0.3) = **₹857.14**.
Enter a target margin in the optional field and the tool also shows the price that would give it. If the selling price is below cost it says you are selling at a loss.
Margin and markup are not the same
- ₹200 profit out of ₹800 sold
- Divides by the selling price
- Can never reach 100%
- ₹200 profit on a ₹600 cost
- Divides by the cost
- Can go above 100%
Margin is always the smaller number for a profitable sale, because the selling price is larger than the cost.
| Markup on cost | Selling price for a ₹600 cost | Margin you actually get |
|---|---|---|
| 10% | ₹660 | 9.1% |
| 25% | ₹750 | 20.0% |
| 50% | ₹900 | 33.3% |
| 100% | ₹1,200 | 50.0% |
A 50% markup is a 33.3% margin, and a 100% markup (doubling the cost) is a 50% margin.
Going the other way: from the margin you want to a price
If you want a given margin, do not just add that percentage to the cost. A 30% markup gives only a 23% margin. The right formula is price = cost ÷ (1 − margin). That is why the tool asks for the target margin and gives you the price.
| Target margin | Price for a ₹600 cost | Same thing as a markup of |
|---|---|---|
| 20% | ₹750.00 | 25.0% |
| 30% | ₹857.14 | 42.9% |
| 40% | ₹1,000.00 | 66.7% |
| 50% | ₹1,200.00 | 100.0% |
Targets above 50% need the price to be more than double the cost. A margin of 100% is impossible, and the tool rejects it.
Each extra 10 points of margin needs a bigger price jump than the one before it.
What the margin leaves out
- Other costs. If cost means only the purchase or production cost, this is a gross margin. Rent, wages, delivery, payment fees and returns come out of it.
- Tax. Enter prices without GST, or with it on both sides, so that the tax does not distort the margin.
- Discounts. A sale price that is lower than the list price changes the margin. Use the price the customer actually pays.
- Volume. A low margin on a fast-moving product can earn more in total than a high margin on a slow one.
Use the margin to compare products and the markup to set a price from a known cost.
A pricing routine
- List the full cost of one unit, not just the purchase price.
- Decide the margin you need to cover running costs and leave a profit.
- Work out the price with cost ÷ (1 − margin).
- Check it against the market, and against what customers will pay.
- Recalculate whenever your costs or discounts change.
Questions people ask
How do I calculate profit margin?
Subtract the cost from the selling price to get the profit, divide by the selling price and multiply by 100. For a cost of 600 and a selling price of 800, the margin is 200 ÷ 800 = 25%.
What is the difference between margin and markup?
Margin divides profit by the selling price. Markup divides profit by the cost. For the same sale the markup is always larger, 33.33% against 25% in this example.
How do I find the selling price for a target margin?
Divide the cost by one minus the margin as a decimal. For a cost of 600 and a margin of 30%, the price is 600 ÷ 0.70 = 857.14.
Can the margin be more than 100%?
No. Profit can never be more than the selling price, so margin stays below 100%. Markup can be above 100% when the price is more than double the cost.
What happens if I sell below cost?
The profit and the margin become negative, and the tool tells you that you are selling at a loss.
Is this the same as the markup calculator?
It shows both numbers. If you only need to add a markup to a cost, the Markup and Margin Calculator is built for that. The Profit Margin Calculator also finds the price for a target margin.