How to use it
- Choose what you want to solve for: the margin itself, the price for a target margin, or the maximum cost.
- Fill in the two known numbers. Results update as you type.
- Check the markup line as well. Suppliers and retailers often quote markup, so it helps to see both.
The formulas
Margin % = (Price − Cost) ÷ Price × 100Price for a target margin = Cost ÷ (1 − Margin)Max cost for a target margin = Price × (1 − Margin)With a $45 cost and a 40% target margin, the price is 45 ÷ 0.60 = $75. A common mistake is to add 40% to cost ($63), which only gives a 28.6% margin.
Margin or markup: which one to use
Margin tells you how much of each sales dollar you keep, so it is the number that ties back to your income statement. Markup is handy on the buying side because you start from what you paid. Use the markup calculator when you think in cost-plus terms.
| Margin | Equivalent markup |
|---|---|
| 10% | 11.1% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
| 60% | 150.0% |
| 75% | 300.0% |
Gross, operating and net margin
This calculator works one sale at a time, which is gross margin. Operating margin also subtracts overhead such as rent and admin salaries, and net margin takes out interest and taxes too. You can see all three for the whole business in the profit and loss template.
When margin alone misleads
- Volume matters. A 60% margin on ten sales can earn less than a 20% margin on a thousand.
- Payment timing matters. A profitable job paid in 90 days can still leave you short on cash.
- Hidden costs. Card fees, returns, shipping and your own time all eat into margin if they are left out of cost.