Profit margin calculator
Margin and markup describe the same profit against different denominators, which is why they get mixed up and why the mix-up costs money. This converts between them, both ways.
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Margin, markup and the price between them
Margin and markup are not the same number
Buy at ₹100, sell at ₹125, and you have made ₹25. Divide that by the selling price and the margin is 20%. Divide it by the cost and the markup is 25%. Same rupees, different denominator — and it is the single most expensive confusion in small-business pricing, because a shopkeeper who marks up 20% thinking they have a 20% margin is quietly short every single sale.
The gap widens as the numbers grow. A 50% margin is a 100% markup. A 75% margin is a 300% markup. If a supplier quotes you one and your accountant asks for the other, this page converts between them.
Working backwards from the margin you need
Pricing usually runs the other way round: you know what an item cost and you know the margin the business needs to survive, and you want the shelf price. That is cost divided by one minus the margin — not cost times one plus the margin, which is the mistake that produces a price a few percent too low. Switch the form to the second mode and it does the division for you.
Gross margin is not profit
What this calculates is gross margin: the gap between what you paid for a thing and what you sold it for. Rent, salaries, electricity, packaging, payment-gateway charges and the stock that never sold all come out of that gap afterwards. A healthy gross margin is the starting point for a profitable business, not proof of one.
Frequently asked questions
What is the difference between margin and markup?
Margin measures profit against the selling price; markup measures the same profit against the cost. A ₹25 profit on a ₹100 item sold at ₹125 is a 20% margin and a 25% markup.
How do I price an item for a 30% margin?
Divide the cost by 0.70. An item costing ₹100 needs a selling price of ₹142.86 to leave a 30% margin. Multiplying by 1.30 gives ₹130, which is only a 23% margin.
Is a higher margin always better?
Not if it costs you volume. A thinner margin on stock that turns over quickly can produce more cash in a month than a fat margin on something sitting on the shelf. Margin and turnover have to be read together.
Does this include GST?
No. Work with figures excluding GST on both sides, since the tax is collected on behalf of the government rather than earned. Mixing an inclusive selling price with an exclusive cost will overstate your margin.
What margin should a retail shop aim for?
It depends entirely on the category. Fast-moving groceries often run on single-digit margins and survive on volume; apparel, cosmetics and hardware typically carry much more. Compare against your own category, not a general figure.