Pricing and business
Markup and margin from cost and selling price
- where
- selling price before VAT (£)
- your cost (£)
- profit as a percentage of cost (%)
- profit as a percentage of selling price (%)
Explain this equation
Shows the profit on a job or item and expresses it two ways: as markup on cost and as margin on the selling price. Use it to check your pricing and to talk to suppliers and accountants on the same terms.
C is what it costs you and P is what you charge, both before VAT. Profit is the difference. Markup compares the profit with your cost; margin compares it with the price the customer pays.
Because the price is always bigger than the cost, the same profit is a smaller percentage of price than of cost. That is why margin is always less than markup.
Sense check: buy at £400, sell at £500: £100 profit, 25% markup, 20% margin. A 50% markup is a 33.3% margin; a 100% markup is a 50% margin.
Watch out: if cost leaves out your overheads (van, insurance, tools), the margin shown is not your true profit.
Shows the profit on an item or job and expresses it both as markup (on cost) and margin (on selling price).
Enter your values to see the result.
Good to know
Markup is profit divided by cost; margin is profit divided by price. A 25% markup is a 20% margin; a 50% markup is a 33.3% margin; a 100% markup is a 50% margin. Always work on figures before VAT.
Common mistake
Adding 20% to cost and believing the margin is 20%. It is only 16.7%.
Limits
Simple arithmetic on one item or job; overheads must be included in cost if you want true net margin.
Sources
Results are calculations from the published methods and manufacturer figures shown, and depend on the data you enter. Always follow the tile, adhesive and grout manufacturers’ instructions, BS 5385 and the Tile Association guidance. Coverage rates vary by product and substrate. Check prices and VAT rules with your own records and HMRC.