Comprehensive Calculator Guide
Profit margin is profit divided by the selling price; markup is profit divided by the cost. An item that costs SAR 80 and sells for SAR 100 makes SAR 20 of profit: a 20% margin but a 25% markup. Both are correct, and mixing them up is one of the most common pricing mistakes, so the calculator shows them side by side.
Margin versus markup
Both start from the same profit and differ only in what they divide by. Margin tells you how much of every 100 riyals a customer pays you keep; markup tells you how much you added on top of what you paid. With a profit, markup is always the larger number.
The mix-up is costly: adding 30% to cost does not give a 30% margin. On an SAR 80 item, 80 × 1.3 = 104, a profit of 24 and a margin of only 23.1%.
Pricing for a target margin
Divide the cost by (1 − margin). For a 30% margin on an SAR 80 item: 80 ÷ 0.7 = SAR 114.29, whose profit of 34.29 is 30% of the price. To convert, margin = markup ÷ (100 + markup) × 100, and markup = margin ÷ (100 − margin) × 100.
This calculator gives the gross margin of one item. Net margin also subtracts rent, salaries and marketing, so a healthy gross margin still has to cover fixed costs. Work with prices before VAT, which is not your revenue.
How to Use
- 01Enter the unit cost: purchase price or production cost, before VAT.
- 02Enter the selling price, before VAT.
- 03Read profit, profit margin and markup; negative values mean you are selling at a loss.
Formula Used
Profit = price − cost | Margin = profit ÷ price × 100 | Markup = profit ÷ cost × 100Practical Examples
Example 1: a simple item
Cost SAR 80, price SAR 100: profit SAR 20, margin 20%, markup 25%.
Example 2: a perfume shop
Cost SAR 150, price SAR 240: profit SAR 90, margin 37.5%, markup 60%.
Example 3: selling at a loss
Cost SAR 100, clearance price SAR 80: profit −SAR 20, margin −25%, markup −20%.
Important Tips
- Agree with your team which of the two numbers "profit percentage" means, and write it down.
- Include everything it takes to get the item on the shelf in its cost: shipping, customs, packaging.
Common Mistakes to Avoid
- Adding the target margin to cost, which yields a lower margin than intended.
- Calculating margin on VAT-inclusive prices.
Frequently Asked Questions
- How do I calculate profit margin?
- Subtract cost from price to get profit, divide by price and multiply by 100. Cost 60 and price 75 give a profit of 15 and a 20% margin.
- How do I price for a 30% margin?
- Divide the cost by 0.7. An item costing SAR 70 sells for SAR 100.
- Can margin exceed 100%?
- No, only if the cost were zero. Markup can: cost 50 and price 150 is a 200% markup but a 66.7% margin.
- What is a good profit margin?
- It varies widely by industry. It must at least cover your fixed costs and leave a net profit, so compare it with your own costs first, then with competitors.