Whether you run a shop, sell online or quote prices to clients, you need to know how much you really earn on each sale. This calculator shows your profit, your profit margin and your markup, and explains why the two percentages are different.
How to use the profit margin calculator
- Enter the cost price: what one item costs you, including purchase, packing and shipping.
- Enter the selling price you charge.
Formulas
Profit = Selling price − Cost price
Profit margin = Profit ÷ Selling price × 100
Markup = Profit ÷ Cost price × 100Example
You buy a product for ₹800 and sell it for ₹1,000.
- Profit = ₹200 per item
- Profit margin = 200 ÷ 1,000 × 100 = 20%
- Markup = 200 ÷ 800 × 100 = 25%
Margin vs markup
Both use the same profit, but margin compares it with the selling price and markup compares it with the cost. That is why markup is always higher than margin. Mixing them up is a common pricing mistake: adding a 20% markup does not give you a 20% margin.
| Markup on cost | Margin on sales |
|---|---|
| 10% | 9.09% |
| 20% | 16.67% |
| 25% | 20% |
| 50% | 33.33% |
| 100% | 50% |
Pricing for a target margin
To earn a specific margin, divide the cost by (1 − margin ÷ 100). For a 20% margin on an ₹800 cost: 800 ÷ 0.8 = ₹1,000. Then check how many units you need to sell with the break-even calculator.
FAQ
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. A product bought at ₹800 and sold at ₹1,000 has a 20% margin and a 25% markup.
What is a good profit margin?
It depends heavily on the business. Groceries and electronics often run on thin margins, while services, software and handmade products can earn much more. Compare with others in your trade.
Should I include GST in the prices?
If you are registered under GST and claim input tax credit, calculate margins on prices without GST, because the GST is not your income. If you are not registered, include GST in your cost.
How do I set a price for a 30% margin?
Divide your cost by 0.7. A product costing ₹700 should be priced at ₹1,000 for a 30% margin.