Margin and markup sound alike but are different, and mixing them up is a common reason for underpricing. Enter what something costs you and either a selling price or the margin or markup you want, and this calculator does the rest.
Margin or Markup?
Markup is your profit as a share of what the item costs you. Margin is your profit as a share of the price you charge. A 50% markup on something that costs £6 gives a price of £9 and a profit of £3, which is a margin of about 33%, not 50%.
A Worked Example
Something costs you £6 and you sell it for £10. Your profit is £4. That is a margin of 40% (4 divided by 10) and a markup of 66.7% (4 divided by 6). To make a 40% margin on a £6 cost you would charge £10.
For Business Owners
Use the cost and price without VAT. The calculator shows the VAT inclusive price for the 20% rate. Include delivery, packaging and your own time in the cost if you want the real profit. Local businesses that want more customers can see the packages for businesses.
Questions about Margin and Markup Calculator
What is the difference between margin and markup?
Markup is profit as a share of cost, and margin is profit as a share of the selling price. The same sale gives a bigger markup figure than margin figure, which is why a 50% markup is only about a 33% margin.
How do I work out the price for a target margin?
Divide your cost by one minus the margin. For a 40% margin on a £6 cost, divide £6 by 0.6, which gives £10. The calculator does this when you enter a target margin.
Should I use prices with or without VAT?
Use prices without VAT. VAT is collected for HMRC and is not part of your profit. The calculator also shows the price with VAT at 20%, so you know what a customer will see.