How to calculate profit margin

Profit margin answers a simple question: of the money a customer pays you, how much is left after the costs you chose to include?

Start with selling price. Subtract direct cost and any extra expenses that belong to that sale — packing, shipping, marketplace fees. What remains is gross profit. Divide that by selling price and multiply by 100. That percentage is your margin.

Markup is a different number. It divides the same profit by cost, not by selling price. A 25% markup is a 20% margin. Mixing the two is the most common pricing mistake we see.

Keep GST consistent. If the selling price includes GST and the cost does not, the margin will flatter you. Decide whether you are looking at a pre-tax or post-tax picture and stay there.

Use the Profit Margin Calculator when you want the arithmetic done carefully, then check the result against your own books before you change a price.