Gross margin calculator

Margin is the share of each sale you keep after the cost of making and delivering it.

• Margin is profit divided by price. A 41% margin means 41 cents of every sales dollar is left after those costs.
• Markup is profit divided by cost. The same sale is a 69% markup. They are different numbers, and mixing them up is a common pricing mistake: a 50% markup is only a 33% margin.
• Where the price goes shows each cost as a share of the price. Start with the biggest line.
• The price for your target counts fees and discounts that grow with the price, so it is higher than cost divided by one minus the target.
• Combined margin weights each product by the units you sell, so one slow seller doesn’t hide behind a best seller.

• Costs per unit = product cost + shipping + packaging + other cost + (price × fee %) + (price × discounts and returns %).
• Profit per unit = price − costs per unit.
• Margin = profit ÷ price. Markup = profit ÷ costs.
• Price for a target margin = (product cost + shipping + packaging + other cost) ÷ (1 − fee % − discounts % − target margin).
• Combined margin = total profit ÷ total sales across your products, using units sold per month.
• Break-even sales = monthly overhead ÷ combined margin.

This is margin on the direct costs of selling one unit.

It leaves out overhead such as rent, salaries and software, apart from the optional overhead line near the bottom. Where the line between direct costs and overhead falls is a call for you and your accountant. Payment fees are counted as a direct cost here. Use the same line every time, so your months can be compared.