Retail Profit Calculator: Markup vs. Margin

Most new retailers default to "Markup" thinking they are calculating "Margin", which results in them bleeding profit on every sale. Use this tool to calculate the correct selling price.

Retail Pricing Calculator

1. Product Cost

SAR

2. Desired Profitability

3. Calculate Based On:

Margin = (Profit / Selling Price)

You should sell at:

125.00 SAR

(Excluding VAT)

Your Profit:25.00 SAR

Show Price with 15% VAT?

Cost (100.00 SAR)Profit (20.0%)

💡 Insight:

To achieve a 20% Margin, you are actually applying a Markup of 25.0%.

Warning! If you used Markup instead, you would have sold at 120.00 SAR and lost 5.00 SAR per unit.

The Dangerous Difference Between Markup and Margin

One of the most common mistakes in retail pricing is confusing Markup with Margin. While they use the same numbers (Cost, Profit, Price), the formulas are different, and confusing them can cost you significant profit.

1. Margin (The Safe Way)

This is what you probably mean when you say "I want to make 20% profit." It calculates profit as a percentage of the Selling Price.

Formula: Selling Price = Cost / (1 - Margin %)
Example: Cost 100, Margin 20% → Price 125. (Profit is 25, which is 20% of 125).

2. Markup (The "Easy" Way)

This calculates profit as a percentage of the Cost.

Formula: Selling Price = Cost × (1 + Markup %)
Example: Cost 100, Markup 20% → Price 120. (Profit is 20, which is only 16.6% of 120).

The Trap

If you want a 20% Margin but use the Markup formula, you will sell at 120 instead of 125. You effectively lose 5 SAR on every unit sold.