Pricing a product
Check that a price leaves the margin you want after every fee.
Profit margin calculator: margin, markup and real profit
See the profit, margin and markup on every sale after platform fees, payment fees, ads, shipping and GST or VAT. Work back to the price for the margin you want, find your break-even, test a discount, or check a whole product list at once.
Free, private, and it runs in your browser. Works in any currency.
Features
What it works out
- Margin and markup
- Both, side by side, with return on spend: the same profit measured three ways.
- Real profit after fees
- Platform and payment fees as a percentage and per order, ad cost per sale, packing and shipping.
- GST and VAT
- Tell it your price includes GST or VAT, and the tax is kept out of your profit.
- Price for a target
- The price to charge for the margin or markup you want, after every fee.
- Break-even
- How many sales cover your monthly costs, and how many reach the profit you want.
- Discount check
- How many more sales a discount needs before it earns the same profit.
- Many products at once
- Paste a product list from Excel or Google Sheets and see every margin, then download it.
- Any currency, shareable
- Rupees, dollars, pounds, euros and more, with a link that keeps your numbers.
How it works
How to use it
Enter your costs
Product cost, shipping, fees and ads, once.
Enter the price
Or the margin you want, and get the price.
Read your margin
Profit, margin, markup and where each sale goes.
Try the other tools
Break-even, a discount, or your whole product list.
Uses
When it helps
Selling on marketplaces
See what Amazon, Flipkart, Meesho or Etsy fees leave you.
Planning a sale
Know what a discount costs before you run it.
Checking a catalogue
Find the products that earn little or lose money.
How to calculate gross profit margin
Gross profit margin is the share of the selling price that is left after paying the direct cost of the item. Enter the cost and the selling price above and the calculator gives you three numbers: gross profit, gross margin % and markup %. The formulas are:
- Gross profit = selling price - cost
- Gross margin % = (selling price - cost) / selling price x 100
- Markup % = (selling price - cost) / cost x 100
Example: an item costs 60 and sells for 100. Gross profit is 40. Gross margin is 40 / 100 = 40%. Markup is 40 / 60 = 66.7%. Same item, two different percentages, because they divide by different numbers.
Margin vs markup: the mistake that costs money
Margin divides profit by the selling price. Markup divides it by the cost. They are never equal unless profit is zero, and margin is always the smaller number. The most common pricing error is adding a 50% markup and assuming you have a 50% margin. You do not: a 50% markup gives a 33.3% margin.
| Markup on cost | Gross margin on price |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 200% | 66.7% |
The conversion is margin = markup / (100% + markup). If a supplier or marketplace quotes one and you think in the other, convert before you compare.
How to price an item for a target margin
Choose "Price for a margin" in the calculator and it does this for you, after fees, ads and GST. The formulas behind it:
- Selling price = cost / (1 - target margin). For a cost of 60 and a 40% margin: 60 / 0.60 = 100. For a cost of 50 and a 30% margin: 50 / 0.70 = 71.43.
- If you price by markup instead: selling price = cost x (1 + markup). A cost of 80 with a 50% markup sells at 120, which is a 33.3% margin.
With fees taken as a share of the price, the calculator solves for the price that still leaves your margin after the fees.
Gross margin vs net margin
Gross margin only subtracts the direct cost of the item or service, such as materials, manufacturing or the price you paid the supplier. Net margin subtracts everything, including rent, salaries, software, marketing and taxes, before dividing by revenue. This tool calculates gross margin. A healthy gross margin still has to be big enough to cover those other costs, so a low gross margin leaves little room before the business loses money.
What is a good profit margin?
There is no single number. Margins differ widely between industries, and between a product you make and one you resell, so compare yourself with businesses like yours rather than a general average. A useful check is whether your gross profit, across all the items you sell, covers your fixed costs with something left over.
Common mistakes when working out margin
- Leaving costs out of the cost figure: shipping in, packaging, payment fees, marketplace fees and returns all reduce the real margin.
- Using a price that includes sales tax, VAT or GST as revenue. Those taxes are not yours to keep, so enter the price without them.
- Forgetting discounts. If you regularly sell at 15% off, work out the margin at the discounted price.
- Comparing a margin figure with a markup figure without converting.
To plan pricing alongside your income, see the in-hand salary calculator; to see what reinvested profit could grow to, the SIP calculator.
Frequently Asked Questions (FAQ)
Markup is the percentage added to your initial cost to reach the final selling price, whereas profit margin is the percentage of the selling price that is actual profit. For example, if you buy a product for $50 and sell it for $100, your markup is 100% (you doubled the cost), but your profit margin is 50% (half of the revenue is profit). Understanding this difference is crucial for accurate business profit calculation.
The standard profit margin formula is: ((Total Revenue - Cost of Goods Sold) / Total Revenue) * 100. For example, if your total sales revenue is $1,000 and your cost of goods sold (COGS) is $600, your gross profit is $400. Divide $400 by $1,000 to get 0.4, then multiply by 100 to find your 40% gross profit margin.
A 'good' profit margin varies wildly by industry. As a general rule of thumb across all industries, a 10% net profit margin is considered average, a 20% margin is considered high (excellent), and a 5% margin is low. However, SaaS (Software as a Service) businesses often see gross margins of 80%+, while restaurants and grocery stores operate on very thin margins of 2% to 5%.
It works out the profit on each sale after the direct costs you enter: product cost, packing and shipping, platform and payment fees and ads. For running costs such as rent and salaries, use the break-even mode. To calculate Net Profit, you would also need to deduct operating expenses, taxes, interest, and overhead costs.