How to calculate margin and markup
- 1.
Choose what you know
Pick a combination: cost and price, cost and margin, cost and markup, price and margin, or price and markup.
- 2.
Enter net amounts
Type the values excluding VAT or sales tax - margin is always calculated on net prices.
- 3.
Read the results
See the margin, markup, profit per unit, cost and selling price, and use the table to convert margin into markup.
Margin vs markup - what is the difference?
Both describe the same profit (price minus cost), but against a different base:
- Margin = profit / selling price × 100%
- Markup = profit / cost × 100%
Example: you buy an item for 80 and sell it for 100. The profit is 20, so the margin is 20 / 100 = 20% and the markup is 20 / 80 = 25%.
With a positive profit the markup is always higher than the margin. The most common pricing mistake is adding the target margin to the cost: 80 + 20% = 96 gives a margin of only 16.67%. The correct price for a 20% margin is 80 / (1 - 0.20) = 100.
The calculator shows amounts in PLN, but the maths is identical in any currency - dollars, euros or pounds give the same percentages.
Formulas and margin to markup conversion
- Price from margin:
price = cost / (1 - margin) - Price from markup:
price = cost × (1 + markup) - Markup from margin:
markup = margin / (1 - margin) - Margin from markup:
margin = markup / (1 + markup)
| Margin | Markup |
|---|---|
| 10% | 11.11% |
| 20% | 25% |
| 25% | 33.33% |
| 30% | 42.86% |
| 40% | 66.67% |
| 50% | 100% |
A margin can never reach 100% (that would mean zero cost), while a markup can be as high as you like - 150% or 300% is common for low-cost goods.
Margin, VAT and sales tax
Calculate margin and markup on net amounts. VAT collected from customers is passed on to the tax office, so it is not part of your revenue if you are VAT-registered. If you only know the gross price, remove the tax first - for example 123 / 1.23 = 100 net at the Polish 23% rate. The Polish VAT calculator does this in one step.
Do not confuse commercial margin with the VAT margin scheme used for second-hand goods or travel services, where tax is charged on the difference between the selling and purchase price. That is a separate tax rule, not a pricing metric.
How discounts eat into your margin
A discount is taken off the selling price, so it cuts profit one for one, but in percentage terms it hurts more than it looks. Cost 70, price 100, margin 30%: a 10% discount lowers the price to 90, profit falls from 30 to 20 and the margin to 22.2%. To earn the same total profit you would need to sell 50% more units (30 / 20 = 1.5).
| Margin before discount | 10% discount | 20% discount |
|---|---|---|
| 20% | 11.1% | 0% |
| 30% | 22.2% | 12.5% |
| 40% | 33.3% | 25% |
| 50% | 44.4% | 37.5% |
When planning a promotion, choose “Cost & price” and enter the discounted price to see the new margin at once. For other percentage questions, such as percentage change, use the percentage calculator. Remember that unit margin ignores fixed costs like rent and salaries - it is gross profit on sales, not the net profit of the business.
Frequently asked questions
How do I calculate profit margin as a percentage?
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What is the difference between margin and markup?
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What price gives a 30% margin?
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Can a margin be higher than 100%?
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How do I convert markup to margin?
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Does the calculator work in currencies other than PLN?
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