Product pricing
Profit margin vs markup: price a product without confusing the two
A seller who wants a 25% margin can underprice a product by adding 25% to its cost. Margin uses selling price as its denominator; markup uses cost. A repeatable pricing workflow makes that distinction visible before a quote leaves your desk.
Use the denominator that matches the decision
Start with an item that costs 80 and sells for 100. Profit is 20. Margin is 20 ÷ 100 = 20%, while markup is 20 ÷ 80 = 25%. Neither percentage changes the underlying profit; they describe it relative to different bases.
For a target margin, price = cost ÷ (1 − margin/100). At a cost of 80 and a target margin of 25%, the unrounded selling price is 106.666… . Adding a 25% markup instead produces a price of 100 and a 20% margin. Choose a currency-appropriate rounding policy before publishing the final price.
Define what your cost includes
Purchase cost alone may leave out packaging, payment fees, returns, fulfillment, and sales commissions. List the costs relevant to the decision and the period. A fixed monthly overhead is different from a variable cost on each sale. Avoid adding the same cost twice when comparing contribution margin and operating profit.
Use a second scenario for a changed supplier quote or channel fee. Save each result with a descriptive name and inspect the inputs when reopening it. A saved result is a snapshot, so changing your current assumptions does not retroactively update an earlier quote.
Check the workflow before reusing it
Test a known example, zero-profit case, and a realistic adverse case. A 100% target margin has no finite price when cost is positive, so the calculator should reject it. Use the break-even tool to compare unit contribution with fixed costs, then place the tools together on your canvas.
The best tool for this task is the one whose cost basis and percentage meaning you can explain. A clear, inspectable formula is more useful than a result with an unexplained “recommended” price.
Authored 2026-10-29. Worked examples checked against the shipped tools; no jurisdiction-specific tax advice is supplied. Examples use the assumptions stated here; authority guidance can change.