Calculate margin on sale, markup on cost, and unit profit. Knowing what percentage each sale really leaves — and telling markup from margin — is the first thing to settle in pricing.
Margin is the percentage of price that remains as profit after costs. Markup is the percentage you add to cost to reach price. The difference seems minor but when you see '50% gain' in two contexts they may mean different things: 50% markup yields 33.3% margin on sale. This calculator clarifies the math and shows both results to avoid biased comparisons.
Financial disclaimerIndicative result — not professional financial advice. Consult a specialist before making investment or credit decisions.
Margin on sale (profit / price), markup on cost (profit / cost), profit per unit, and minimum sustainable price if you declare a target margin. It also works backward: given a cost and a target margin, what price you must set.
Who it's for
For retailers, merchants, manufacturers, service providers, and resellers who need clarity on per-unit profitability. For pricing leads who must present margins to a committee or buyer. For freelancers quoting per project who want to know what real margin remains after direct costs.
When to use it
When setting the price of a new product. When evaluating whether a supplier improves real profit. When comparing margins across SKUs or categories. When reviewing pricing after a cost increase. Before accepting a promotion or discount that seems small.
When NOT to use it
Don't use it to decide a global pricing change with effects on mix and volume — that decision lives in the pricing simulator. Don't use it as the only evidence to defend a target margin in committee; you also need allocated overhead, expected returns, and per-channel comparisons.
What data it needs
Unit cost
What it costs you to produce or acquire one unit: inputs, manufacturing, importing, variable commission, average logistics cost.
Sales price
Net price to the end customer. If you sell with channel commission, subtract it first so margin reflects what you actually receive.
Target margin (optional)
If you declare it, the calculator suggests the minimum price to reach that margin on sale. Useful for opening negotiation.
Formula
Margin on sale = (Price − Cost) / Price. Markup on cost = (Price − Cost) / Cost. If you buy at $200 and sell at $400, margin on sale is 50% and markup on cost is 100%. Unit profit is always the same ($200), but the percentage shifts with the denominator.
How to interpret the result
Margin on sale is the standard indicator for comparing across products and companies — use it when speaking with your CFO, accountant, or committee. Markup is operational: useful when you mechanically raise price over cost (e.g. retailer with many SKUs). The key: don't compare a supplier's 'margin' to your internal 'markup' without converting; the percentages are not interchangeable.
How this calculator was reviewed
What you'll see, what it prevents, and where you shouldn't trust it
Every flagship calculator ships with the same editorial structure: two hypothetical worked examples with numbers, the errors it helps you avoid, the model's declared limitations, and a visible financial disclaimer. The review is signed and dated.
Hypothetical case·Case A
A boutique that thinks it has 50% margin and learns markup ≠ margin
A boutique buys blouses at $200 MXN and sells them at $400. The owner says she has '100% margin'. The calculator clarifies: that 100% is markup (over cost). Margin on sales is 50%. The distinction matters when comparing against a competitor saying '60% margin' — if that 60% is also markup, it actually operates at 37.5% margin. The decision: standardize the metric before comparing across stores, brands, or categories.
Illustrative figures. This example does not represent a real company or a financial recommendation.
Hypothetical case·Case B
A service that sells more, bills more, and earns less due to margin compression
A landscaping service went from 80 to 110 services/month (+37.5%) after a promotion. Revenue rose from $192,000 to $231,000 (+20%). But after subsidizing the average price 15% and keeping variable costs flat, contribution margin dropped from 42% to 30%. Result: profit before fixed costs fell from $80,640 to $69,300. The calculator shows the promotional discount moved margin faster than volume could compensate. Decision: review actual elasticity before the next promotion.
Illustrative figures. This example does not represent a real company or a financial recommendation.
Common mistakes it helps you avoid
Things a team or decision-maker might assume that this calculator forces you to verify before closing the math.
Confusing markup and margin. Markup = (Price − Cost) / Cost. Margin = (Price − Cost) / Price. The same absolute profit yields different percentages.
Calculating gross margin and forgetting overheads: gross margin covers variable costs; fixed costs (rent, payroll, software) come out after. A positive gross margin doesn't guarantee a positive net margin.
Applying percentage margin to rounded prices: if your target margin is 35% and you sell the product at $99 after rounding, real margin can drop to 31% or jump to 38% without you noticing.
Treating margin as constant per SKU: effective margin shifts with volume discounts, returns, channel commissions, and per-zone logistics — the calculator clarifies the unit scenario, not the aggregate.
Model limitations
What the calculator does not do, and where you need a professional or a specialized tool.
Calculates margin on the declared transaction, not on the portfolio. For mix-weighted margin, open the pricing simulator.
Does not include indirect costs (payroll, rent, marketing) that allocate per unit only after a total volume is set.
Does not model price-volume elasticity. If you raise price to improve margin, the calculator does not project how much volume drops — that lives in the simulator.
Does not consider returns or shrinkage, which in high-return sectors (online fashion, electronics) can drop effective margin 5-12 points.
When NOT to use this calculator
Do not use this calculator to decide a global pricing change or to set prices for products in a complex mix. It is a unit-level tool useful to understand the math of margin and markup, not a strategic pricing engine. For pricing decisions that move volume and mix, open the pricing simulator; to validate whether your business covers fixed costs, use the break-even calculator.
Financial, tax, accounting and legal notice
The result is an informative estimate based on the data you enter. It does not constitute financial, tax, accounting, or legal advice. For decisions that affect taxes, financing, or wealth, validate the numbers with a certified professional in your jurisdiction.
Editorial review
Reviewed by the Simúlalo editorial team
This simulator was reviewed by the people listed below before being published. The review covers the declared formula, the model's assumptions, the explicit limitations, and the absence of unsupported financial claims.
They are part of the Simúlalo editorial team, focused on building financial tools that are clear, educational, and easy to interpret.
Last updated: ·We update this page when the methodology, sources used, or simulator structure change.
This tool uses standard financial formulas and user-supplied data. To explain concepts like rates, credit, risk, or cash flow we consult public and official sources (Banxico, SAT, CONDUSEF, CNBV, Banco de España, IFRS, BIS, among others). Simúlalo is not affiliated with, sponsored by, or endorsed by these institutions.
Frequently asked questions — profit margin
1What's the difference between margin and markup?
Margin is profit over price (denominator: price). Markup is profit over cost (denominator: cost). Since price is always greater than cost, markup % is always greater than margin % for the same absolute profit. 50% margin equals 100% markup; 33.3% margin equals 50% markup.
2Are gross margin and net margin the same?
No. Gross margin covers only direct variable costs. Net margin also subtracts allocated fixed costs (rent, payroll, depreciation), operating expenses, interest, and taxes. A company with 60% gross margin can have a 5% net margin if fixed costs are high.
3How do marketplace and platform commissions affect margin?
Commissions (typically 10-22%) are subtracted before calculating effective margin. If your margin on public price is 40% and the platform charges 16% of public price, effective margin drops to about 28%. Declare the price NET of commissions when using this calculator.
4What margin is healthy?
It depends entirely on the sector. Traditional retail operates at 25-45% gross; restaurants 60-70% gross on food and 75-85% on beverages; SaaS sustains 70-85% gross. Comparing against benchmarks for your specific sector is more useful than seeking a universal number.
5Why does selling more volume sometimes lower margin?
Because volume discounts, proportional channel commissions, and per-zone logistics costs can grow faster than the fixed-cost-per-unit savings. The calculator shows unit margin; to see the impact of volume on aggregate profit and price-volume elasticity, open the pricing simulator.
Which product should I prioritize to maximize cash?
Compare your price against costs and fees to spot which products actually leave cash and which just inflate revenue.
Results
Gross profit
MXN 40
Gross margin
40.0%
Net profit
MXN 30
Net margin
30.0%
Markup
66.7%
Gross margin vs industry40.0%Healthy
Margin is based on price. Markup is based on cost. They are not the same.
With 40.0% margin you are applying 66.7% markup over your cost.
What price do you need for a target margin?
30%
For 30% margin with your cost of MXN 60, the price must be MXN 86.
Healthy
Which product should I prioritize to maximize cash?
Gross margin40.0%Net per unit$30
Diagnosis
Gross margin 40.0%, net 30.0%. This product produces real cash ($30 per unit). In your catalog, this is one of the heavyweights.
Threshold
Operators with gross margin > 25% are in the premium / defendable zone. Between 10% and 25% is healthy but competitive. < 10% is thin — won't absorb shocks.
Action
You're generating $40 of margin per unit. Defend the price (don't discount except for anchor customers) and scale what works: priority stock, featured placement in the channel, ad budget focused on this product.
Risk if you do nothing
Healthy margin today isn't healthy margin tomorrow. Costs rise, competitors squeeze, commissions creep up. Without quarterly review, today's 40.0% erodes invisibly until it's already in yellow.