Markup tells you what you added. Margin tells you what you kept — and they're never the same number. Enter what something costs and what you charge, and see what you're really keeping — or name the margin you need and get the price that delivers it.
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A baker makes a cake. The ingredients and box cost her 10,000.
She adds 30% — the number she's used for years — and charges 13,000.
She believes she's making 30%. She's making 23%. The 3,000 she keeps is 30% of what she paid, but only 23% of what the customer paid, and it's the second one that has to cover her rent.
To actually keep 30%, she needed to charge 14,286.
She's been 1,286 light on every cake, for years, without a single customer complaining.
Markup starts from cost. Margin starts from price.
Markup % = (Price − Cost) ÷ Cost × 100. Margin % = (Price − Cost) ÷ Price × 100.
Because the price is always bigger than the cost, the margin is always the smaller number. Add 50% to your cost and you keep 33% of the sale.
To go the other way — from the margin you want to the price you need: Price = Cost ÷ (1 − Margin as a decimal). For a 30% margin on something costing 1,000: 1,000 ÷ 0.70 = 1,429. That's a 43% markup, not 30%.
| If you add this to your cost | You keep this share of the sale |
|---|---|
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 40% | 28.6% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
The gap is widest where most small businesses trade. At a 30% markup — the sort of figure a shop or a market trader might quote without thinking twice — you're keeping seven points less than you believe.
Suppose you've been pricing at a 30% markup for years, believing you keep 30%.
You actually keep 23.1%. On a million in sales, that's 69,000 you thought you had and don't. And because you priced the whole shop that way, the error isn't in one item — it's in all of them.
It also compounds with the other mistake most owners make. A 23% gross margin sounds workable until running costs come out. If rent, staff, power and your own pay take 27% of sales, that 23% gross becomes −4% net. The shop looks fine on markup, acceptable on gross, and loses money on every sale.
That's the whole reason the calculator asks for your running costs. Gross margin is what pricing gives you. Net margin is what you live on.
Never start with your competitor's price. Start with your own costs. Their price tells you what the market will bear, not what you can afford to sell for. If your costs are higher than theirs, matching their price is a decision to earn less, not a strategy.
Count everything that only gets spent when you sell one. The goods themselves, but also packaging, transport, the commission you pay someone, the discount you routinely give. Leave those out and your margin is a fiction.
Work backwards from the margin you need. Decide what the business has to keep, then let the arithmetic set the price. That's what the second mode of the calculator does, and it's the opposite of how most prices get set.
Then check it against your trade. Retail and market trading commonly run 15–25% gross; food 55–70%; salons, tailoring and services 60–90%. Well below your range and something is wrong with the pricing. Well above it and you may be leaving volume on the table — or you may have found something worth protecting.
Raise prices in small, quiet steps. A few percent rarely costs you a customer and moves the bottom line more than most cost-cutting, because your running costs don't move when your price does. That last point is the most useful thing on this page: almost every extra naira from a price increase lands in profit.
Pricing is where margin starts — it isn't where it ends. Getting your markup right protects the top of the chain. Rent, staff, transport and your own pay still come out below it. Gross is what pricing gives you. Net is what you live on.
Not sure what to fix first? It looks at your profit, your cash, how exposed you are to one big customer, and how much the business depends on you — then tells you where to start. Free, about 10 minutes.
Take your free Business Health CheckReady to price the rest? Add your items with their costs and Monyvo suggests a selling price with your margin built in — for everything you sell, not one line at a time. Free plan available.
Get the Monyvo appYour margin is the number break-even runs on. Now find out how much you must sell — each month and each trading day — to cover everything, including paying yourself.
Open the break-even calculator →Pricing is only half of it. If you make what you sell, cost it from the ingredients up to see what's really driving the margin you just priced.
Open the food cost calculator →