Free tool
Margin and selling price calculator
Enter two of cost price, selling price, margin or markup and get the rest, including the difference between margin and markup and the price with VAT.
Fill in both fields to see the result.
Margin is calculated on the selling price, markup on the cost price. That is why a 25% markup equals a 20% margin, and why margin can never be 100% or more.
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Calculating margin: the difference between margin and markup
This calculator works out your selling price, margin and markup from any two known values. Margin and markup both describe the difference between your cost price and your selling price, but they measure that difference against a different amount. Margin is the profit divided by the selling price. Markup is the profit divided by the cost price. If you buy an item for €8 and sell it for €10, the profit is €2. That is a 20% margin (2 ÷ 10) and a 25% markup (2 ÷ 8).
The difference looks small, but it causes a lot of confusion. Anyone who says "25% margin" but calculates 25% markup earns less than they think: 25% markup on €8 gives €10, which is only a 20% margin. The other way round: if you really want a 25% margin, your selling price has to be €8 ÷ 0.75 = €10.67, which is a 33.3% markup. To convert, use margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin).
Margin can never be 100% or more, because the profit can never be larger than the whole selling price. Markup has no upper limit: if you double the cost price, the markup is 100% and the margin 50%. If your calculation gives a margin of 100% or more, you almost certainly mean markup.
How to use the margin calculator
First choose what you want to calculate. If you know your cost price and your target margin or markup, the tool works out the selling price. If you know your cost and selling price, you see the margin and the markup. If you know which selling price the market accepts and which margin you need, you see the maximum cost price you can pay your supplier.
Enter all amounts excluding VAT. Suppliers usually quote prices excluding VAT, and you earn your margin on the price without VAT too: the VAT goes to the tax authorities. The tool also shows the consumer price including 21% and 9% Dutch VAT, with a few tidy price points ending in .49, .95 and .99. These are always slightly above the calculated price, so your margin does not drop below your target.
If you enter a quantity, you also see the total profit, for example on a batch or on the expected sales in a month. The result always shows which figure you entered yourself and which one was calculated.
Gross margin and how to set a selling price
The margin you calculate with this tool is the gross margin: the difference between buying and selling, without any other costs. Out of it you still pay rent, staff, energy, your point of sale system, insurance, shrinkage and theft. What remains after that is net profit. A healthy gross margin is therefore no guarantee of profit; it is the room you have to cover your fixed costs.
You usually set a selling price from three angles. From your costs: cost price plus a margin that covers your fixed costs. From the market: what do others charge for the same product, and what do customers consider reasonable? And from value: for a product that is scarce, or that customers can pick up from you quickly and nearby, they often pay more. The calculated price is a floor to start from, not the end point.
Price points ending in .95 or .99 are widely used in retail because a price just below a round amount feels cheaper. Whether that works for your shop depends on your customers and your positioning. More important is that your prices are consistent and that you check again after a price change whether your margin still adds up.
Margins in supermarkets, convenience stores and hospitality
Margins vary widely by sector and product group. In a supermarket, many staples such as bread, dairy and promotions have a small margin per item, while profit comes mainly from volume and from product groups with a higher margin. A convenience store often charges higher prices, because customers pay for ease, opening hours and location.
In hospitality, prices are often set with a multiplier on the cost price rather than a percentage, for example three or four times the cost of a drink. That is in fact markup: a multiplier of 4 means a 300% markup and a 75% margin. Convert such a multiplier to margin if you want to compare it with the figures in your accounts.
Use general rules of thumb only as a starting point. What a good margin is for your business depends on your fixed costs, your turnover and your product mix. If you track your margin per product group in your point of sale or inventory system, you quickly see which items make your profit and which mostly take up space.
Frequently asked questions
Margin calculator: your questions answered
How do I calculate my margin?
Subtract the cost price from the selling price and divide the result by the selling price. With a cost of €8 and a price of €10, the margin is (10 − 8) ÷ 10 = 20%. Use prices excluding VAT for both amounts.
What is the difference between margin and markup?
Margin is the profit as a percentage of the selling price; markup is the profit as a percentage of the cost price. That is why the markup percentage is always higher than the margin percentage: a 25% markup is a 20% margin.
How do I calculate a selling price with a given margin?
Divide the cost price by 1 minus the margin. For a 30% margin on a cost price of €7, that is €7 ÷ 0.70 = €10. Do not multiply by 1.30: that is a 30% markup and gives you a 23% margin.
Why can margin not be 100% or more?
Margin is a share of the selling price. The profit can never be larger than the whole price, so a 100% margin would mean your cost price is zero. Markup, on the other hand, can exceed 100%.
Do I calculate margin with or without VAT?
Without VAT. The VAT your customer pays goes to the tax authorities; it is not revenue for you. So calculate with cost and selling prices excluding VAT, and only add VAT to the consumer price afterwards.
What is a good gross margin?
It varies by sector and product group, and depends mainly on your fixed costs. Your gross margin needs to cover rent, staff and other costs and still leave a profit.
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