MulticalcMargin Calculator
Enter cost and selling prices.
Margin vs Markup: Key Differences
Many business owners confuse these two concepts, but they measure profit differently. Understanding both is crucial for pricing strategy and business analysis.
Gross Margin
Definition: Profit as a percentage of selling price
Margin = (Profit / Selling Price) × 100
Example:
Cost: ₹100, Selling: ₹150
Profit: ₹50
Margin: (50/150) × 100 = 33.33%
Use For: Understanding profitability, comparing business efficiency
Markup
Definition: Profit as a percentage of cost price
Markup = (Profit / Cost Price) × 100
Example:
Cost: ₹100, Selling: ₹150
Profit: ₹50
Markup: (50/100) × 100 = 50%
Use For: Setting prices, cost-plus pricing strategies
Profit & Margin Formulas
Basic Calculations:
1. Profit = Selling Price - Cost PriceThe absolute amount of money you make
2. Margin % = (Profit / Selling Price) × 100Profit as percentage of what you charged
3. Markup % = (Profit / Cost Price) × 100How much you marked up the cost
Real-World Calculation Example:
Given: Cost = ₹200, Selling Price = ₹350
- Step 1: Profit = ₹350 - ₹200 = ₹150
- Step 2: Margin = (₹150 / ₹350) × 100 = 42.86%
- Step 3: Markup = (₹150 / ₹200) × 100 = 75%
- Result: 42.86% margin with 75% markup on cost
Real-World Margin Examples
Example 1: Retail Clothing
Scenario: T-shirt manufacturer buys fabric for ₹150, manufactures for ₹50, sells to retailer for ₹250
- Cost Price: ₹200
- Selling Price: ₹250
- Profit: ₹50
- Margin: (50/250) × 100 = 20%
- Markup: (50/200) × 100 = 25%
Lower margins in retail due to high competition and volume-based business model.
Example 2: Software/SaaS Business
Scenario: Development cost ₹50,000, annual license price ₹100,000
- Cost Price: ₹50,000
- Selling Price: ₹100,000
- Profit: ₹50,000
- Margin: (50,000/100,000) × 100 = 50%
- Markup: (50,000/50,000) × 100 = 100%
High margins typical in digital products after development costs covered.
Example 3: Premium Restaurant Service
Scenario: Dish ingredients cost ₹80, labor/overhead ₹40, menu price ₹350
- Cost Price: ₹120
- Selling Price: ₹350
- Profit: ₹230
- Margin: (230/350) × 100 = 65.71%
- Markup: (230/120) × 100 = 191.67%
High margins in hospitality sector due to ambiance, service, and brand value.
Example 4: Wholesale Business
Scenario: Wholesale goods cost ₹1,000, bulk selling price ₹1,100
- Cost Price: ₹1,000
- Selling Price: ₹1,100
- Profit: ₹100
- Margin: (100/1,100) × 100 = 9.09%
- Markup: (100/1,000) × 100 = 10%
Low margins in wholesale compensated by high volume and fast inventory turnover.
Typical Profit Margins by Industry
Different industries have different margin expectations based on competition, costs, and value proposition:
| Industry | Typical Margin Range | Notes |
|---|---|---|
| Retail (Grocery) | 2-5% | High volume, low margins, fast turnover |
| Electronics Retail | 5-15% | Medium margins, competitive market |
| Clothing & Fashion | 40-60% | Brand value, seasonal variations |
| Restaurants | 5-15% | High operating costs (labor, rent, utilities) |
| Software/SaaS | 50-75% | High initial development, scalable revenue |
| Consulting Services | 30-50% | Labor-intensive, expertise-based pricing |
| E-commerce | 20-40% | Variable by product category and competition |
| Healthcare | 15-25% | Regulated industry with specific cost structures |
When to Use This Calculator
Use When:
- ✓ Setting prices for new products
- ✓ Analyzing business profitability
- ✓ Comparing profit across products
- ✓ Budget planning and financial analysis
- ✓ Deciding if a deal is worth pursuing
- ✓ Cost control and efficiency measures
Key Insights:
- ✓ Markup is always higher than margin
- ✓ Margin reflects true profitability
- ✓ Markup guides price setting strategy
- ✓ Compare with industry benchmarks
- ✓ Track margins over time for trends
- ✓ Account for all costs in price setting
Quick Tips
- Account for ALL Costs: Production, packaging, shipping, tax
- Volume vs Price: Higher margin doesn't always mean higher profit
- Monitor Quarterly: Track business health over time