Margin and markup are not the same number
Both start from the same profit, selling price − cost. Margin expresses that profit as a share of the selling price; markup expresses it as a share of the cost. Mixing them up is one of the most common pricing mistakes: a trader who "adds 30%" to cost thinks they have a 30% margin, but they actually earn 23.1%.
| Markup on cost | Equivalent margin |
|---|---|
| 20% | 16.67% |
| 25% | 20% |
| 33.33% | 25% |
| 50% | 33.33% |
| 100% | 50% |
Formulas used
- Profit = selling price − cost
- Margin % = profit ÷ selling price × 100
- Markup % = profit ÷ cost × 100
- Price for a target margin = cost ÷ (1 − margin ÷ 100)
- Price for a target markup = cost × (1 + markup ÷ 100)
Include every cost that belongs to the product
For gross margin, cost means what you paid for the goods plus freight inward, packing and any direct labour. Shipping to the customer, payment gateway charges and marketplace commissions reduce your real margin too, so add them to cost when you want the contribution you actually keep per sale.
Then add GST on top of the price. The calculator shows the GST-inclusive price at the rate you choose, the same way you would bill it. For the full explanation read profit margin vs markup, check the volume you need with the break-even calculator, and prepare a quotation with the final price.
Frequently asked questions
What is the formula for profit margin?
Profit margin % = (selling price − cost) ÷ selling price × 100. A product bought for ₹700 and sold for ₹1,000 has a 30% margin.
What is the difference between margin and markup?
Margin divides profit by the selling price. Markup divides profit by the cost. The same ₹300 profit on a ₹700 cost is a 30% margin but a 42.86% markup.
How do I find the selling price for a target margin?
Selling price = cost ÷ (1 − margin/100). For a 25% margin on a ₹750 cost, price = 750 ÷ 0.75 = ₹1,000.
Should GST be included in margin?
No. For a GST-registered business, GST collected is passed on to the government, so calculate margin on prices excluding GST and add GST afterwards.
What is a good profit margin?
It depends on the industry. Retail and distribution often work on single-digit or low double-digit net margins, while software and services can be much higher. Compare with businesses like yours.
