About

Pricing products correctly is the single most critical decision for a small business owner. A miscalculation in the Profit Margin can lead to negative cash flow, regardless of sales volume. This calculator addresses the complexity of pricing by accounting not just for the Cost of Goods Sold (COGS), but also for fixed Overhead Costs like rent, marketing, and software subscriptions.

Unlike simple markup tools, this utility operates bi-directionally. It solves for the Selling Price needed to achieve a target margin, or calculates the actual margin based on a set price. This distinction is vital because Markup and Margin are mathematically different, and confusing them is a common cause of lost revenue.

Formulas

The core relationship between price, cost, and margin follows these fundamental equations. The calculator adjusts the formula based on the unknown variable.

1. Find Selling Price (Target Margin):

Price = Cost1 − Margin100

2. Find Profit Margin:

Margin = Price − CostPrice × 100

3. Net Profit (with Overhead):

NetProfit = Revenue − (COGS + Overhead)

Reference Data

Industry Sector	Avg. Gross Margin (%)	Avg. Net Margin (%)	High Performers (%)
Retail (Clothing)	45 - 55	4 - 13	15+
Restaurants	60 - 70	3 - 6	10+
Software (SaaS)	70 - 85	20 - 30	40+
Manufacturing	25 - 35	5 - 10	12+
Professional Services	40 - 60	15 - 25	30+
Construction	17 - 25	2 - 5	8+
Automotive Repair	50 - 60	10 - 12	15+
E-commerce (Dropshipping)	15 - 20	2 - 5	10+

Frequently Asked Questions

Markup is the percentage added to the cost to get the selling price. Margin is the percentage of the selling price that is profit. For example, if Cost is $100 and Price is $150: Markup is 50%, but Margin is 33.3%.

Variable overheads (like shipping or packaging per unit) should ideally be added to the COGS input. Fixed overheads (rent, salaries) should be allocated on a per-unit basis or entered as a lump sum in the "Overhead" section if calculating for a specific batch.

A negative margin indicates that the Total Costs (COGS + Overhead) exceed the Selling Price. This is common when underpricing to gain market share or when overhead costs are underestimated.

The calculations focus on Pre-Tax Profit. Sales tax (VAT/GST) is typically collected from the customer on top of the selling price and remitted to the government, so it is not considered revenue for margin calculations.