Advanced options
Markup is profit over cost; margin is profit over selling price. The same sale always shows a bigger markup than margin: 25% markup equals 20% margin. Mixing them up is the classic pricing error.
What The Markup And Margin Calculator Works Out
- Selling price: from a markup, cost x (1 + markup); from a target margin, cost divided by (1 - margin); or entered directly. A 25% margin on GBP 80 of cost prices at GBP 106.67, not GBP 100: multiplying by one plus the margin is the classic error, and a business that does it earns 20% instead of 25%, a fifth less profit on every sale.
- Markup: profit as a percentage of cost. Retail and trades quote markup because it is arithmetic on the invoice in front of them. Doubling the cost ("keystone" pricing) is a 100% markup.
- Margin: profit as a percentage of the selling price. Accounts and investors speak margin because it divides cleanly out of revenue. GBP 80 cost sold at GBP 100 is a 25% markup but a 20% margin; 50% markup is 33.3% margin; 100% markup is 50% margin. The two never meet.
- Extra cost per unit (advanced): delivery, packaging or per-unit labour added to the cost price so the markup and margin are calculated on the true cost of getting the item to the customer.
- Payment or marketplace fee (advanced): card processing (1.5% to 3%) or marketplace commission (often 10% to 15%) taken as a percentage of what the customer pays. It comes straight out of the margin.
- Discount offered (advanced): a promotional percentage off the selling price. The margin after discount and fees card shows the real profit per unit once both are deducted.
- Price including VAT (advanced): VAT-registered businesses work net; the VAT (20% standard, 5% reduced) is added on top and belongs to HMRC, so it is never part of markup or margin.
- Total profit on the quantity (advanced): the net profit per unit multiplied by the units sold, with the revenue alongside. Margin percentage is not profit: a lower-margin line that turns its stock faster can out-earn a prestige margin sitting on the shelf.
- Price to keep the margin after discount (advanced): the list price you would need to set so that, once the discount and fees are taken, the margin is still what you intended. It is the number to use when planning a sale.
- Markup to margin table (advanced): common markups with their equivalent margins and the resulting price on your cost, a thirty-second way to agree which one a conversation means.