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Pricing strategies start with one number your accountant can give you and you probably can’t: what each sale really costs you. If an item costs $60 to deliver, a 40% margin means a $100 price. A 40% markup means $84, and that’s a very different business.
Why do margin and markup get mixed up?
Because both are percentages of profit that start from different bases, and people quote one while thinking of the other. Margin is profit as a share of the selling price. Markup is profit as a share of cost. Markup is always the bigger figure.
| Cost | Price | Profit | Margin | Markup |
|---|---|---|---|---|
| $60.00 | $84.00 | $24.00 | 28.6% | 40.0% |
| $60.00 | $85.71 | $25.71 | 30.0% | 42.9% |
| $60.00 | $100.00 | $40.00 | 40.0% | 66.7% |
Figures like these come from the profit margin calculator, so try it with your own cost. Owners who say “I add 40%” and then read a margin target off a report end up about 11 points apart without noticing.
How do you work back from the margin you want?
Divide your cost by one minus the margin. It’s the step most people skip, and it’s the one an accountant will do on a napkin in about ten seconds. On a $60 cost, the maths looks like this.
| Margin you want | Price | Profit per sale |
|---|---|---|
| 25% | $80.00 | $20.00 |
| 40% | $100.00 | $40.00 |
| 50% | $120.00 | $60.00 |
Check the middle row: $60 divided by 0.60 is $100. Multiply the cost by 1.4 and you’d land on $84, the trap from the first table. It’s only a few bucks on one item, but it adds up across a year of sales.
How can an accountant help you set a price?
By working out the full cost first. Materials or supplies are the easy part. The accountant also spreads rent, software, wages and your payroll costs across what you sell.
Wages carry an extra layer people forget. For an Ontario employee paid $2,000 every two weeks, the payroll remittance calculator adds $156.63 of employer CPP and EI per pay period. So the real cost is $2,156.63, about 7.8% more than the wage. Price on the wage alone and you’ll come up short, and you won’t see it until the year end report arrives and the margin you planned turns out to belong to someone else’s job.
Next comes the target. Ask what margin the business needs to cover overheads and pay you, then work back from there. An accountant can show it from your own books, so you don’t have to take an industry average on faith. This page doesn’t quote typical margins, because there’s no reliable official set for Canadian firms to point to.
What does a discount really cost?
More than it looks.
Return to the $100 item with a $60 cost. Take 15% off and the price becomes $85. Profit drops from $40 to $25, a fall of 37.5%, and margin slips from 40% to 29.4%.
To earn the same $40 profit you’d need to sell 60% more units, since $40 divided by $25 is 1.6. Will a 15% sale bring 60% more customers? If you don’t know, that’s a question for your accountant and your sales records, not a hunch.
A smaller sale hurts less, but it still bites. Take 10% off and the price is $90, profit falls to $30 and margin to 33.3%. You’d need a third more units (40 divided by 30 is 1.33) just to stand still.
The discount calculator also handles the tax side. Discounts come off before sales tax, so the tax is charged on the lower price. In Ontario, $100 plus 13% HST is $113, and the GST/HST calculator shows the split.
How do taxes shape the price you show?
If you’re registered for GST/HST, tax gets added to your price and passed to the CRA. It isn’t revenue. If your posted prices already include tax, your real price is lower than it looks. At 13%, a $113 sticker is $100 to you.
Should the price show with tax or without it? That turns on who buys. Shoppers often want one all-in figure, while business buyers work from prices before tax, and your accountant can tell you how your invoices should read.
The profit itself is taxed too. On $300,000 of taxable income, the corporate tax calculator shows $35,088 for an Ontario small business corporation, or 11.7%. Use that as a ballpark. Ontario cut its small business rate on 1 July 2026, and the tool uses a derived blend for a calendar 2026 year.
What should you bring to the meeting?
Your cost per item or per hour, last year’s sales by product, and a list of the discounts you actually gave. Add the prices of two or three competitors if you have them, and a note about which customers you’d happily lose.
That last one sounds odd. But a customer who only buys on sale is often the one eating your margin.
What mistakes and limits come up in pricing?
Copying a competitor’s price without knowing their costs is the usual one. Their margin may be fine, or they may be losing money on every sale just to keep a customer list, and you can’t tell which from the shelf.
Others: forgetting time spent on quoting and returns, giving discounts that no one reviews, and never raising prices because you fear losing one customer. Test a rise on new work before your regulars see it.
The calculators here are one item, one price. They don’t model volume, seasonal swings or a mix of products.
What this page is based on
The margin, markup and discount figures come from the calculators on this site, using simple arithmetic on the costs stated. Tax rates come from Canada Revenue Agency corporate tax rate pages and 2026 provincial data checked in September 2026. There are no prices or margin averages here for any trade or product. No level of government runs or endorses this site.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the price. Markup is profit as a share of the cost. A $60 item sold at $100 has a 40% margin and a 66.7% markup.
How much extra do I need to sell to pay for a 15% discount?
On a $100 item costing $60, about 60% more units to earn the same profit, since profit falls from $40 to $25.
Are discounts taken before or after sales tax?
Before. Tax is charged on the lower price, so $100 with 13% HST is $113 in Ontario.
Should I price on the wage alone?
No. Employer CPP and EI add about 7.8% to a $2,000 biweekly wage in Ontario, and other costs come on top.
What margin should I aim for?
We couldn't confirm a reliable Canadian average, so work it from your own overheads and the pay you need.
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