Margin and markup calculator

Ask ten owners what their margin is and a few will give you their markup without realising. The two figures use the same dollars of profit but divide by different numbers, and mixing them up quietly underprices every sale. Type in a cost and a price and this tool returns both, side by side.

How the calculator works

Just two boxes need filling in.

• Cost to you. What it costs to buy or produce one unit, or to deliver one job: stock, materials, freight in, direct labour. If you’re registered for GST, use the figure excluding the GST you’ll claim back.
• Selling price before GST. What the customer pays you, less any GST.

From those, four results appear instantly:

Output	How it’s worked out	Why it’s useful
Gross margin	(price − cost) ÷ price	The share of each sale left after direct costs
Markup	(price − cost) ÷ cost	How much you’ve added on top of cost
Profit per sale	price − cost	The dollars each sale contributes
Price for a 40% margin	cost ÷ 0.6	A fixed benchmark: what you’d charge for a 40% margin

The note under the results is a reminder that accountants and lenders almost always talk in margin.

Worked example: an electrician’s switchboard quote (illustrative)

An electrical contractor in Newcastle supplies and installs a switchboard. Parts and direct labour cost $240 and the quoted price is $330 before GST.

• Profit per sale: $330 − $240 = $90
• Gross margin: $90 ÷ $330 = 27.3%
• Markup: $90 ÷ $240 = 37.5%
• Price for a 40% margin: $240 ÷ 0.6 = $400

The owner thought they were “making nearly 40%”. They were, on markup. On margin it’s 27.3%, and the price that delivers a true 40% margin is $70 higher.

Need the GST-inclusive figure for the customer? Our GST calculator adds or removes it. On a GST-inclusive price, the GST component is one-eleventh of the total.

Margin and markup conversion table

Markup	Equals margin of
25%	20.0%
33.3%	25.0%
42.9%	30.0%
50%	33.3%
66.7%	40.0%
100%	50.0%

The gap widens as the numbers grow. A 100% markup sounds generous but leaves half the price to cover rent, wages, loan repayments and profit.

The discount trap

Discounts eat margin faster than most people expect. Take an item costing $70 and selling for $100: a 30% margin, $30 profit. Offer 10% off and the price falls to $90, but profit drops to $20. That’s a third of the profit gone from a “small” discount, and volume has to rise by half before gross profit is back where it started. Run your sale price through the calculator before the promotion goes live, not after.

Gross margin isn’t the whole story

This calculator works on gross margin: price less direct costs. It doesn’t know about rent, admin wages, insurance, software, vehicle running costs or loan repayments. Those overheads come out of gross profit before anything is left for the owner, which is why net margin is always lower.

A quick sense check: total your monthly overheads, then divide by your average gross profit per sale. That’s how many sales a month you need just to stand still. If the number looks unrealistic for your capacity, the fix is usually price, not volume. The break-even calculator does this sum properly.

It also pays to review margin by product or job type rather than as one blended figure. Many businesses find a handful of lines carry the profit while others barely cover their own costs once freight, wastage or callbacks are counted.

Why margin matters when you borrow

When a lender reviews your profit and loss statement, gross margin is one of the first things it checks. It shows how much of each dollar of turnover is left to service debt. Two businesses with the same turnover can have very different borrowing capacity if one runs at 45% gross margin and the other at 18%.

For comparison, the ATO’s small business benchmarks list a cost of sales to turnover ratio for each industry. Gross margin is roughly 100% minus that ratio, so it’s a handy way to see whether your pricing sits in the normal range for your trade. A margin well outside the range invites questions from both the ATO and lenders.

If stronger margins mean you’re ready to fund more stock or a large order, find out what you could borrow. Your credit file isn’t checked when you ask.

Related pages that build on this one:

• Break-even calculator: how many sales cover your fixed costs at this margin.
• Business borrowing power calculator: how margin and profit translate into a loan size.
• Funding a large order and buying stock and inventory: where good margins usually lead next.
• Glossary: gross profit and margin.

Healthy margins, short on cash?

Plenty of profitable firms still hit a cash wall, usually because growth needs stock, staff or equipment before customers pay. If that’s you, send us a quick outline: what you sell, your rough margin and what the money’s for. It’s about a minute’s work and nothing is recorded on your credit file. Your enquiry isn’t sold on or broadcast to lenders; a real person in our team works through it and phones you. Accurate turnover and margin figures help us point you to the right kind of finance on the first conversation.

See what my margins could fund →