Margin and markup from the same numbers
Enter cost and price and both appear. They describe the same profit against different bases, and the gap between them widens as profitability rises: a 20% margin is a 25% markup, but an 80% margin is a 400% markup.
Pricing for a target
The target margin field answers the question that causes real losses: what price gives me the margin I want?
Divide, do not add. Cost ÷ (1 − margin). At a 50% margin, that means doubling the cost. At 75%, quadrupling it. Adding the percentage instead undercharges by an amount that grows with the target.
Gross is not net
This calculates gross margin: revenue minus the direct cost of what you sold. Rent, salaries, software, marketing and tax all come out afterwards. A business with a healthy gross margin and no net margin is a common and survivable problem; one where the gross margin is negative is not, because volume makes it worse.
Questions
How do I price for a target margin?+
Divide the cost by one minus the margin. A 40% margin on a cost of 60 means 60 ÷ 0.6 = 100. Adding 40% to the cost gives 84, which is a 28.6% margin — the most expensive arithmetic error in retail.
Why is a 100% margin impossible?+
Because margin is profit divided by price, and profit can never exceed price unless the goods cost less than nothing. As the target approaches 100%, the required price approaches infinity.
Is this gross or net margin?+
Gross — cost of goods against revenue. Net margin subtracts overheads, salaries, rent and tax as well, and it is always the smaller figure. Do not quote one and plan with the other.
What margin should I aim for?+
There is no universal answer: software runs at 80%+, grocery retail at low single digits, both healthily. What matters is whether the margin covers your fixed costs at your volume, which is what the [break-even calculator](/t/break-even-calculator) answers.