Pay $60 for a product, sell it at $100, and your margin is 40%. Your markup on the same sale is 66.7%. Type in a cost and a price to see both, or set the margin you want and let the profit margin calculator hand back the price that gets you there.
Margin or markup, which one is it?
Same profit, two divisions. Divide the profit by the selling price and you get margin. Divide it by what the item cost you and you get markup. Cost is always the smaller number, so markup always looks bigger. A shop that sets prices by markup but reads its reports as margin will misjudge its own profit.
Every row below uses a $60 cost.
| Margin | Price for a $60 cost | Profit per item | Markup |
|---|---|---|---|
| 20% | $75.00 | $15.00 | 25.0% |
| 30% | $85.71 | $25.71 | 42.9% |
| 40% | $100.00 | $40.00 | 66.7% |
| 50% | $120.00 | $60.00 | 100.0% |
What do the numbers look like on a real item?
Start with the $60 cost and the $100 price. Profit is $40. Divide by the price and you get a 40.0% margin. Divide by the cost and the markup is 66.7%.
Now go the other way. You want a 30% margin on that same $60. Pick the second option and enter 30. The price comes out at $85.71, profit is $25.71, and the markup lands at 42.9%.
Here’s the one that trips people up. A 50% markup on $60 sells at only $90.00. That’s a 33.3% margin, nowhere near 50%.
Why doesn’t cost plus 40% give a 40% margin?
It’s the most common slip. Add 40% to a $60 cost and the price is $84, but the margin on that is 28.6%. To land on 40% you divide the cost by what’s left after the margin, and the second option in the calculator does exactly that.
Remember too that the result is gross. It knows only the cost per item you type in, so rent, wages, shipping and card fees stay out unless you fold them into the cost field. Sales tax isn’t part of the selling price here either. And a margin of 100% or more can’t be solved at all, because no price gets you there.
How do I use it to set a price?
Work backwards. Decide what margin the business needs to cover its running costs, then price from cost. If rent and wages take 25% of every sale, a 20% gross margin leaves you in the red. Put the margin you need into the second option and ask whether customers would pay that price.
Check again whenever a supplier raises costs. Say an item you sell at $100 goes from $60 to $66. Your margin slides from 40% to 34%, and keeping the old margin would take a price of $110.
Where do the figures come from?
Gross margin is profit over price, markup is profit over cost, and both show to one decimal place. No rates or tax rules are involved, so the answer comes only from what you type. This website has no connection with any government body.
Once you’ve settled on a price, the HST and GST calculator shows what customers will actually pay at the till. The ROI calculator measures the return on money you put into stock or equipment, and the percentage calculator covers shares and changes in general. If you run the business alone, the self-employed tax calculator gives you an estimate of your own tax.
Frequently asked questions
What's the difference between margin and markup?
Margin is profit divided by the selling price. Markup is profit divided by the cost, so it always comes out higher.
How do I get the price for a target margin?
Divide the cost by one minus the margin. A $60 cost and a 30% margin give $85.71.
Is a 50% markup a 50% margin?
No. A $60 cost with a 50% markup sells at $90.00, and that is a 33.3% margin.
Does this show net profit?
No, it's gross margin. Rent, wages, shipping and fees are left out unless you add them to the cost.
Can I aim for a 100% margin?
No. A margin of 100% or more can't produce a price, so the calculator won't solve it.
Sources and updates
Updated: . How we check rates · Editorial team · Updates
Estimate only. These figures are a planning estimate, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns, and we don't offer tax, legal or accounting services. We have no connection with the Canada Revenue Agency, Revenu Québec or any provincial government. Your real amounts depend on details this tool cannot see, so confirm them with an official source or a qualified professional before you act.