Profit per sale
£4.00
Gross margin
40%
Markup
66.7%
Selling price
£10.00
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. Same profit, two different percentages.
Free margin calculator
Enter what an item costs you and what you sell it for. See your profit, gross margin and markup side by side, or switch to work out the price that hits the margin you want.
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. Same profit, two different percentages.
Both start from the same number, your profit per sale: selling price − cost. They just divide it by different things.
Because the selling price is always bigger than the cost (if you're making money), margin is always the smaller percentage. That is the mistake that costs owners money: adding 40% to the cost does not give you a 40% margin.
| Item | Cost | Price | Profit | Margin | Markup |
|---|---|---|---|---|---|
| Packaged granola | £2.40 | £4.50 | £2.10 | 46.7% | 87.5% |
| Bottle of wine | £6.00 | £10.00 | £4.00 | 40% | 66.7% |
| Flat white (ex VAT) | £0.90 | £2.67 | £1.77 | 66.3% | 196.7% |
| Cost + 40% markup | £6.00 | £8.40 | £2.40 | 28.6% | 40% |
The last row is the trap in numbers. An owner who wants a 40% margin and adds 40% to a £6 cost charges £8.40 and keeps £2.40 a sale. Charging £10, the right price, keeps £4.00. Across 50 sales a week that gap is £80.
The flat white uses £3.20 including 20% VAT, which is £2.67 before VAT. VAT you collect goes to HMRC, so margins are always worked out on the price without VAT.
Use margin when you're judging how healthy a product or a business is. Accounts, lenders, suppliers and industry benchmarks quote gross margin, and margin tells you directly how much of your takings is left to pay rent, wages and energy. A shop that runs on a 25% margin keeps 25p of every pound before overheads.
Use markup when you're setting a price from a cost on the shop floor. "Cost plus 50%" is quick to apply to a delivery note, but always convert it back to margin before you decide it's enough. A 50% markup is only a 33.3% margin.
Running a café or coffee shop? See what a café really keeps from each sale, with official UK cost data and a worked cup of coffee.
Use the target-margin mode above when you know the margin you need and want the price. It does the cost ÷ (1 − margin) step for you, which is the step people most often get wrong in their heads.
If you also sell through Deliveroo, Uber Eats or Just Eat, the platform's commission comes out of the price the customer pays. That is a second cut on top of your cost, so the same margin needs a much higher price. On a zero-rated item, a 30% commission on top of a 25% target margin leaves only 45p of each pound to cover the cost, so the price becomes cost ÷ 0.45. Tick "Selling this on a delivery app?" in the calculator to carry your numbers into the delivery pricing calculator, which also shows where the markup would land in Deliveroo's Value Programme tiers.
Both use the same profit, selling price minus cost. Margin divides it by the selling price; markup divides it by the cost. A £6 item sold for £10 has a £4 profit, a 40% margin and a 66.7% markup.
Divide the cost by one minus the margin as a decimal. For a 40% margin on a £6 cost, the price is £6 ÷ 0.60 = £10. Adding 40% to the cost instead gives £8.40, which is only a 28.6% margin.
No. If you are VAT registered, the VAT you charge is collected for HMRC, so work out margin on the price without VAT. A £3.20 drink including 20% VAT is £2.67 before VAT.
No. A 50% markup is a 33.3% margin. To get a 50% margin you need a 100% markup, which means doubling the cost.
Selling on delivery apps? Use the delivery pricing calculator, or see all our guides and calculators.
SyncShelf is in a free first test with a small batch of shops on Square and Deliveroo. Leave your email and we'll contact you when it's your turn. No cost, no commitment.