Business Profit Calculator
Calculate profit margins, markup percentages, and break-even prices. Know exactly how much you're earning on each sale or what price you need to hit your profit target.
What you paid for the item
What you're selling it for
Margin vs Markup: They Are Not the Same Thing
Profit margin is profit divided by selling price. Markup is profit divided by cost. A product that costs £40 and sells for £100 has a 60% margin and a 150% markup. People mix these up constantly and end up underpricing themselves, especially in retail and e-commerce where suppliers quote 'use a 50% markup' but the buyer hears 'I want a 50% margin' and ships at half the intended price.
Use margin when you are reporting profitability or comparing across SKUs. Use markup when you are pricing from cost upwards on the shop floor. The calculator runs both directions: enter cost and selling price to see margin and markup side by side, or enter cost and a target margin to back out the price you need to charge.
Margin to Markup Conversion Reference
| Target Margin | Required Markup | Example: £10 cost |
|---|---|---|
| 20% | 25% | Sell at £12.50 |
| 30% | 42.9% | Sell at £14.29 |
| 40% | 66.7% | Sell at £16.67 |
| 50% | 100% | Sell at £20.00 |
| 60% | 150% | Sell at £25.00 |
| 70% | 233% | Sell at £33.33 |
What a Healthy Margin Actually Looks Like
Healthy margins vary wildly by sector. Supermarkets run on 2 to 4% net margins because volume carries them. Software businesses commonly hit 70 to 90% gross margin because the cost of the next sale is almost zero. Handmade goods on Etsy often look healthy at 50% gross margin until you subtract Etsy's 6.5% transaction fee, the £0.16 listing fee, payment processing and offsite ad fees, at which point the real number drops below 30%.
Always separate gross margin (revenue minus cost of goods) from net margin (after rent, salaries, software, ads). Founders quote gross margin in pitch decks because it sounds better; banks and accountants want to see the net. If your net margin is below 5% you have almost no buffer for a bad month, so price up or cut overheads.
The Break-Even Price Is Your Floor, Not Your Target
Break-even is the selling price that returns your cost with zero profit. It is useful for clearance sales and competitor matching, but it is the worst possible price to anchor your menu on. Pricing 'just above break-even' leaves no room for discounts, bulk orders, returns or fees. The first time a customer asks for 10% off, you are now losing money.
A more honest floor is break-even plus the percentage cost of doing business: card fees (around 1.5 to 2.5% on Stripe), refund rate (often 3 to 8% on consumer goods), and any platform commission. For an Etsy seller pricing their first product, that means break-even plus around 12 to 15% before you have made a single penny. Use the [etsy-fee-calculator](/etsy-fee-calculator) to see exactly what comes off the top before profit.
Frequently Asked Questions
What is the formula for profit margin?
Profit margin equals (selling price minus cost) divided by selling price, multiplied by 100. So a product that costs £40 and sells for £100 has a margin of (100 minus 40) divided by 100, which is 60%. The same product has a markup of 60 divided by 40, which is 150%. The two figures describe the same gap from different angles.
How do I calculate selling price from a target margin?
Divide your cost by (1 minus the margin expressed as a decimal). For a 40% margin on a £15 cost item, that is 15 divided by 0.6, giving £25. The shortcut formula in the calculator does this automatically; this is the inverse of the margin calculation and the right way to price up from cost.
Is a 30% margin good for a small business?
Gross margin of 30% is reasonable for retail and e-commerce, slim for manufacturing, and weak for software or services. The crucial question is whether 30% is enough to cover your overheads (rent, salaries, software, marketing) and still leave a net profit. Many product businesses target a 50 to 65% gross margin so that net profit lands in the 10 to 20% range after fixed costs.
Should I include VAT in margin calculations?
No, calculate margin on the net (ex-VAT) figure. VAT is collected on behalf of HMRC and is not your money. If you sell at £120 including 20% VAT and the product cost £40 ex-VAT, your real revenue is £100 and your margin is 60%. Including VAT inflates the margin figure artificially and gives you a false sense of profitability.
Why does the calculator show both margin and markup?
Because supplier quotes, retail pricing and accounting reports use different conventions and getting them mixed up is the most common pricing error in small businesses. Showing both side by side prevents the trap of being told 'apply a 50% markup' and accidentally pricing for a 50% margin (which would require a 100% markup), giving away half your profit on every sale.
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