A pet shop adds 40 % to the cost of everything and thinks it keeps 40 % of each sale. It keeps 28.6 %. This markup vs margin calculator shows both numbers for each item — and the price that gives the margin you need.
| Item | Cost | Price |
|---|
| Item | Gross profit | Markup | Margin | Price for the target |
|---|
The calculator runs in your browser. Nothing you type is sent anywhere. Use prices without VAT. Yellow rows are below the target margin.
Markup = gross profit ÷ cost
Margin = gross profit ÷ price
The same profit, divided by two different numbers. The markup tells you how to set a price from the cost. The margin tells you what part of each sale stays with you — and your rent and wages are paid from that part.
A pet shop prices its goods at cost + 40 %. The owner says: we keep 40 % of every sale.
Rent, wages and card fees take 35 % of the sales. A 40 % margin leaves 5 % for profit. But is it a 40 % margin?
| Item | Cost | Price | Gross profit | Markup | Margin | Price for 35 % |
|---|---|---|---|---|---|---|
| Dog food 12 kg | 30.00 | 42.00 | 12.00 | 40.0 % | 28.6 % | 46.15 |
| Cat litter 10 l | 8.00 | 11.20 | 3.20 | 40.0 % | 28.6 % | 12.31 |
| Leather leash | 6.00 | 12.00 | 6.00 | 100.0 % | 50.0 % | 9.23 |
| Aquarium filter | 25.00 | 35.00 | 10.00 | 40.0 % | 28.6 % | 38.46 |
The 40 % is a markup: a part of the cost. The dog food keeps 12.00 of a 42.00 price — a margin of 28.6 %. It is less than the 35 % the shop needs, so each bag sold at this price pays less than its share of the rent and wages.
Only the leashes, with a 100 % markup, are above the target. For a 35 % margin, the markup must be 53.8 %: dog food at 46.15, not 42.00.
Then the spring sale: 10 % off the dog food. The price falls by 4.20, and all of it comes out of the profit: 7.80 in place of 12.00, 35 % less. The margin is now 20.6 %. To earn the same gross profit, the shop must sell 54 % more bags.
A markup is a part of the cost; a margin is a part of the price. Set prices from the margin you need, and check each discount against the profit, not the price.
One item per row: the cost in B and the price without VAT in C. The target margin in J1 (0.35 for 35 %). Then:
=C2-B2=IF(B2=0,"",(C2-B2)/B2)=IF(C2=0,"",(C2-B2)/C2)=B2/(1-$J$1)Format E and F as percentages. To convert one number to the other: margin =E2/(1+E2), markup =F2/(1-F2).
Both divide the same gross profit. Markup divides it by the cost; margin divides it by the price. Buy at 30.00 and sell at 42.00, and the 12.00 profit is a 40 % markup and a 28.6 % margin.
Margin = markup ÷ (1 + markup). Markup = margin ÷ (1 − margin). A 40 % markup is a 28.6 % margin; a 35 % margin needs a 53.8 % markup. A margin is always smaller than the markup on the same item.
The landed cost: the supplier price plus its share of freight, duty and fees. A margin on the supplier price alone is too high. The landed cost calculator splits a shipment over its items.
Without. The VAT in the price belongs to the tax office, not to you. A margin on a price with VAT looks higher than the money you keep.
The discount comes off the price, but all of it comes out of the profit. 10 % off a price with a 40 % markup takes 35 % of the gross profit. To earn the same profit, you must sell about 54 % more units.
No. A margin says what you keep from one sale, not how often you sell. The GMROI calculator multiplies the margin by the turns and shows what each item earns on the money in its stock.
In Golden Inventory, each item can take its price from its cost: "% markup from cost" or "Margin from cost". When a receipt changes the average cost — freight and duty included — the price follows. Start on the free plan, no card.