PRICING BASICS
Margin is not markup.
Here’s why it matters.
You buy something for £10 and sell it for £15. You made £5, so is your percentage 50% or 33.33%? Both are correct. They answer different questions.
Start with the actual profit
Subtract your cost from your selling price. In this example, £15 − £10 = £5. That is the profit before any additional costs. Once you know the money left over, you can express it as a share of your selling price or as a share of your cost.
This distinction is useful when comparing a supplier’s recommended markup with your own margin target. A percentage without a clear label can make a product seem more profitable than it is.
Margin looks at the selling price
Divide profit by revenue, then multiply by 100. With £5 profit on a £15 sale, the margin is £5 ÷ £15 × 100 = 33.33%. Roughly one-third of the sale is left after the £10 cost.
Margin (%) = (selling price − cost) ÷ selling price × 100
Markup looks at the cost
Divide profit by cost, then multiply by 100. With £5 profit on a £10 cost, the markup is £5 ÷ £10 × 100 = 50%. You added half of the original cost to arrive at the selling price.
Markup (%) = (selling price − cost) ÷ cost × 100For a profitable sale with positive costs, markup is higher than margin. Neither percentage is a mistake; the denominator is different.
| Selling price | Markup | Margin |
|---|---|---|
| £12.50 | 25.00% | 20.00% |
| £15.00 | 50.00% | 33.33% |
| £20.00 | 100.00% | 50.00% |
| £25.00 | 150.00% | 60.00% |
Work backwards from your margin
If you want a 30% margin, your costs need to occupy the other 70% of the sale. Divide your cost by 0.70. A £10 item therefore needs a selling price of £14.2857…; our calculator rounds that up to £14.29.
Selling price = cost ÷ (1 − target margin ÷ 100)Adding 30% to the cost instead produces £13. That price leaves £3 profit, which is £3 ÷ £13 × 100 = 23.08% margin. This is a common reason a planned margin turns out lower than expected.
Include the costs you actually pay
The simple formulas assume the cost is the only expense. If you pay £2 for postage and packaging, a £15 sale leaves £3 after a total cost of £12. Your margin is then 20%, and the markup on total included costs is 25%.
On this website, the markup result uses total included costs. With the optional cost fields empty, it is the usual markup on purchase price. With those fields filled, it tells you the return above the costs you included.
Percentage selling fees need a little more care because increasing the price also increases the fee. The target-price calculator accounts for this by dividing fixed costs by one minus both the margin rate and fee rate. Read the seller’s cost guide for an example.
Know the limits of a per-sale calculation
A 30% margin does not mean 30% of revenue becomes take-home income. Rent, subscriptions, advertising, returns, wages and tax may still need to come out of the money left over. Use this calculation to compare individual sales, then assess the wider business separately.