Profit margin calculator
See your profit margin and markup side by side, or find the selling price for the margin you want.
Short answer
Profit margin = (price − cost) ÷ price. Markup = (price − cost) ÷ cost. An item that costs 80 and sells for 100 makes a profit of 20: a 20% margin and a 25% markup. For a target margin, price = cost ÷ (1 − margin).
How to use it
- Choose what you know: cost and selling price (to see your profit) or cost and target profit (to find your price).
- Enter amounts before VAT.
- Read margin and markup together, plus the suggested selling price.
Formulas
| You want | Formula | Example (cost 80) |
|---|---|---|
| Profit | price − cost | 100 − 80 = 20 |
| Profit margin | profit ÷ price × 100 | 20 ÷ 100 = 20% |
| Markup | profit ÷ cost × 100 | 20 ÷ 80 = 25% |
| Price for a target margin | cost ÷ (1 − margin) | 20% margin: 80 ÷ 0.80 = 100 |
| Price for a target markup | cost × (1 + markup) | 20% markup: 80 × 1.20 = 96 |
Worked examples
| Cost | Price | Profit | Margin | Markup |
|---|---|---|---|---|
| 80.00 | 100.00 | 20.00 | 20% | 25% |
| 50.00 | 75.00 | 25.00 | 33.33% | 50% |
| 12.50 | 15.00 | 2.50 | 16.67% | 20% |
| 200.00 | 250.00 | 50.00 | 20% | 25% |
| 1,140.00 | 1,520.00 | 380.00 | 25% | 33.33% |
Last row: you want a 25% margin on an item that costs 1,140, so the price is 1,140 ÷ 0.75 = 1,520. Adding 25% to cost would give 1,425, which is only a 20% margin.
The common mistake: mixing up margin and markup
You want a 20% margin, so you add 20% to cost: 80 × 1.20 = 96. The margin at that price is 16 ÷ 96 = 16.67%, not 20%. For a true 20% margin, divide: 80 ÷ 0.80 = 100.
Rule of thumb: margin is a share of the selling price; markup is a share of the cost. For the same item, margin is always lower than markup, and it can never reach 100%.
What if my price includes VAT?
Take the VAT out first, because it isn't your profit. An item costs 40 before VAT and sells for 57 including Egypt's 14% VAT:
- Price before VAT = 57 ÷ 1.14 = 50
- Profit = 50 − 40 = 10: a 20% margin and a 25% markup.
Working from 57 would suggest a profit of 17 and a 29.82% margin, which is wrong. To take VAT out of a price, use the VAT calculator.
Know the profit on every item and every invoice
Kaffa works out item cost by moving average from your purchases, shows profit per invoice and net profit in its reports, and never counts VAT as profit. Arabic and English, and it works offline.
Frequently asked questions
What is the difference between margin and markup?
Margin = profit ÷ selling price. Markup = profit ÷ cost. An item that costs 80 and sells for 100 has a 20% margin and a 25% markup.
I want a 20% margin. What should I charge?
Selling price = cost ÷ (1 − 0.20). A cost of 80 ÷ 0.80 = 100.
I want a 20% markup. What should I charge?
Selling price = cost × 1.20. A cost of 80 × 1.20 = 96, which is only a 16.67% margin.
Should I use prices before or after VAT?
Before. Use cost and selling price without VAT; the tax isn't your income.
Can margin be 100% or more?
No. A 100% margin would mean zero cost. Markup can go above 100%: cost 50, price 150 is a 200% markup and a 66.67% margin.
Do you store the numbers I enter?
No. Everything is calculated in your browser.