What this tool does
Markup and margin are not the same thing, and confusing them is one of the most expensive errors in pricing. Markup is profit divided by cost. Margin is profit divided by selling price. The two give different numbers, and the difference grows as margins rise. This calculator handles both, and shows what a discount does to a price you have already set.
How it works
Margin is profit over selling price. If something costs 60 and sells for 100, the profit is 40 and the margin is 40%, not 66%. A 66% figure is the markup, which measures profit over cost. Sellers who need margin to cover overheads and payment fees must use the margin figure.
Discounts are always applied to the selling price, so they hit margin harder than they look. Selling at a 20% discount on a 40% margin does not leave 20% margin, because the cost is unchanged while revenue drops. The tool reports the post-discount margin directly so there is no mental arithmetic to get wrong.
Working backwards is usually what you actually need. Given a target margin and a known cost, the required price is cost divided by (1 minus the target margin). Solving it in that direction avoids the compounding error that comes from marking up a marked-up price.
Worked example
An item costs 60 including all fees. You sell it at 100, then offer 20% off.
- Cost = 60, selling price = 100
- Profit = 100 - 60 = 40
- Margin = 40 / 100 = 40%
- After 20% discount: price = 80, margin = 20 / 80 = 25%
A 20% discount cuts margin from 40% to 25%, a 37.5% relative reduction, because the cost never changes.
Accuracy and limitations
- Tax and shipping are not included. If your cost figure excludes VAT or delivery, add them before relying on the margin result.
Frequently asked questions
- What is the difference between markup and margin?
- Markup is profit divided by cost, margin is profit divided by selling price. On a 60 cost and 100 sale, markup is 66% and margin is 40%. They are two views of the same transaction, and you need margin when covering overheads because overheads are a share of revenue, not of cost.
- How much discount can I afford?
- Set the target margin first, then read the maximum discount the tool allows. That keeps pricing decisions tied to the economics rather than to whatever a competitor happens to be doing this week.
- How do I hit a target margin?
- Divide the total cost by one minus the target margin. For a 60 cost at a 30% margin, 60 divided by 0.70 gives roughly 85.71, not 78, which is the common result of applying the margin as a markup.
- Should marketplace fees go in cost or in deductions?
- Include them in cost, because that is what makes the margin decision honest. A listing fee that only appears after the sale still reduces what you keep, and treating it as separate tends to hide how thin the real margin is.