How it is calculated
Profit = price − cost Margin = profit ÷ price × 100 Markup = profit ÷ cost × 100 Price for a target margin = cost ÷ (1 − margin)E.g. cost 100 and price 150: profit 50, margin 33.3% (of price), markup 50% (of cost).
Worked example
You buy at 80 and want a 25% margin: price = 80 ÷ 0.75 = 106.67. Adding 25% to cost (100) gives only a 20% margin.
Frequently asked questions
Margin vs markup?
Margin is profit as a share of price; markup is profit as a share of cost. A 100% markup is a 50% margin.
Should prices include VAT?
Work on prices excluding VAT, since VAT is not your income.
What is a good margin?
It depends on the sector: grocery retail runs thin margins; clothing and software far higher.