Margin & Markup Calculator
Calculate profit, gross margin percentage and markup percentage from cost and selling price.
The margin and markup calculator shows the difference between two numbers business owners often confuse. Margin is profit as a share of the selling price, while markup is profit as a share of the cost. A 50% markup is only a 33% margin — mixing them up is a common pricing mistake.
How to use the calculator
- Enter your cost price per unit.
- Enter your selling price per unit.
- See the gross margin, the markup and the profit.
- Use margin for profitability and markup when setting prices.
How it is calculated
Gross margin = Profit ÷ Selling × 100
Markup = Profit ÷ Cost × 100
Worked example
Cost ₹800, selling ₹1,200
Profit = ₹400
Margin = 400 ÷ 1,200 = 33.3%; markup = 400 ÷ 800 = 50%.
Who should use this margin calculator
- Shopkeepers and online sellers setting prices and wanting to know what is actually left after cost.
- Restaurant and cafe owners, where food margins are high but have to cover rent and staff.
- Anyone comparing a supplier quote with their selling price before committing to a product.
- Small business owners preparing a simple profit picture without a full accounting system.
Common mistakes to avoid
- Using markup as if it were margin. They are calculated on different bases. A 50% markup on an ₹800 cost gives a 33.3% margin, not 50%. Pricing on markup while managing on margin is how businesses sell a lot and earn little.
- Forgetting the costs that sit outside the product. Marketplace commissions, payment gateway fees, shipping, packaging and returns all come out of the same money.
- Calculating margin before tax. GST is collected on behalf of the government and is not part of your revenue, so including it inflates the margin.
- Ignoring dead stock and shrinkage. A margin calculated on units sold looks better than the margin on units bought if some never sell.
- Pricing to a target margin without checking the market. The formula gives the price you need; whether customers will pay it is a separate question.
Margin, markup and pricing to a target
Cost ₹800, selling price ₹1,200. The profit is ₹400. As a percentage of the selling price that is a 33.3% gross margin; as a percentage of cost it is a 50% markup. Both describe the same ₹400, which is why using the wrong label causes so much confusion in pricing conversations.
If you want a specific margin, the formula is cost divided by one minus the margin. For a 40% margin on ₹800, divide 800 by 0.6, giving a selling price of ₹1,333.33. Working backwards like this is far more reliable than adding a percentage to cost and hoping the margin comes out where you wanted it.
Margin terms explained
- Gross margin
- Profit as a percentage of the selling price, before operating expenses such as rent and salaries.
- Markup
- Profit as a percentage of the cost price. Always higher than the margin for the same transaction.
- Cost price
- What you paid for the item, including inbound freight and any duties.
- Selling price
- What the customer pays, excluding taxes that you collect on behalf of the government.
- Contribution margin
- Selling price minus variable cost. It is the amount each sale contributes towards fixed costs and profit.
- Break-even price
- The selling price at which profit is exactly zero for a given cost. Anything below it sells at a loss.
Setting up a simple pricing sheet
Five columns are enough to price anything: cost price, selling price, profit, gross margin and markup. Fill them in once for your best-selling items and the pattern becomes obvious — products that look profitable often are not once marketplace commission and shipping are added to the cost.
Two habits make the sheet reliable. First, always price to a target margin rather than adding a markup, using cost divided by one minus the margin. Second, recalculate whenever a cost changes; a small increase in packaging or commission can quietly turn a comfortable margin into a thin one. Reviewing the sheet each quarter takes minutes and catches most pricing problems before they show up in the bank balance.
Frequently asked questions
What is the difference between margin and markup?
Margin measures profit against the selling price, while markup measures it against the cost. Selling at ₹1,200 something that cost ₹800 is a 50% markup but only a 33% margin.
What is a good gross margin?
It varies by industry: grocery and retail often run on 10–30%, restaurants on 50–70% on food, and software can exceed 80%. What matters is that the margin covers your fixed costs and leaves a profit.
How do I set a price for a target margin?
Divide the cost by (1 − margin as a decimal). For a 40% margin on a ₹800 cost: 800 ÷ 0.6 = ₹1,333.33 selling price.