Profit Margin & Markup Calculator
Work out your profit margin and markup, or find the selling price needed for the margin you want.
1. Find your margin and markup
2. Find the price for a target margin
Margin vs markup: what is the difference?
Profit margin is your profit as a percentage of the selling price. Markup is your profit as a percentage of the cost. They use the same profit figure but different bases, so markup is always higher than margin. For example, an item that costs RM20 and sells for RM30 earns RM10 profit. That is a 33.3% margin but a 50% markup.
Mixing the two up is one of the most common pricing mistakes for small businesses. If you add 40% to your cost, you do not get a 40% margin. You get about 28.6%. To reach a 40% margin, you need to divide your cost by 0.6, which is what the second calculator above does for you.
Use the first calculator to check your current products, and the second to price new ones. Remember that cost should include everything that goes into the product, such as materials, packaging, labour and delivery, not only what you paid the supplier.
Frequently asked questions
What is the formula for profit margin?
Profit margin = (selling price - cost) / selling price x 100. For a cost of RM20 and a price of RM30, the margin is (30 - 20) / 30 x 100 = 33.3%.
What is the formula for markup?
Markup = (selling price - cost) / cost x 100. Using the same example, the markup is (30 - 20) / 20 x 100 = 50%.
What is a good profit margin?
It depends on the business. Many small product businesses aim for a gross margin of 30% to 60%, but your overhead, competition and volume all matter. Compare with similar sellers in your market.
How do I set a price to get a specific margin?
Divide your cost by (1 - target margin). For a 40% margin, price = cost / 0.6. The second calculator on this page does this for you.
Should I include my own time in the cost?
Yes. If you do not pay yourself for your time, the business can look profitable while it is actually losing value. Include a fair hourly rate for your own work.