Calculate your margin
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Gross profit
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Markup
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Gross margin
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Short answer: Gross margin = (price − cost) ÷ price × 100. An item that costs $30 and sells for $50 makes $20 gross profit: a 40% margin and a 66.7% markup. To hit a target margin, price = cost ÷ (1 − margin).
Find the price for a target margin
Price to charge
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Gross profit per sale
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Uses the cost entered above. Price = cost ÷ (1 − target margin).
Margin vs markup
Sellers mix these up constantly, and it costs money. "I mark everything up 50%" is only a 33.3% margin. Here's how the two line up:
| Gross margin | Equivalent markup | Price on a $20 cost |
|---|---|---|
| 20% | 25% | $25.00 |
| 25% | 33.3% | $26.67 |
| 30% | 42.9% | $28.57 |
| 40% | 66.7% | $33.33 |
| 50% | 100% | $40.00 |
| 60% | 150% | $50.00 |
Markup = margin ÷ (1 − margin). Margin = markup ÷ (1 + markup).
Don't forget marketplace fees
A margin calculated on product cost alone flatters you if a platform takes a cut of every sale. Selling a $30-cost item for $50 on eBay at roughly 13.6% + $0.40 leaves about $12.80 instead of $20, closer to a 26% margin than 40%.
Work out the fee for your platform first, then add it to the cost field above: eBay, Etsy, Mercari, PayPal or Stripe.
Frequently asked questions
How do you calculate gross margin?
Gross margin = (selling price − cost) ÷ selling price × 100. Sell for $50 something that cost you $30 and your gross profit is $20 and your gross margin is 40%.
What's the difference between margin and markup?
Both use the same profit, but margin divides it by the selling price while markup divides it by the cost. A $30 item sold for $50 has a 40% margin and a 66.7% markup. Margin can never reach 100%; markup can go above it.
How do I price for a 50% margin?
Divide your cost by (1 − 0.50). An item costing $20 needs a $40 price for a 50% margin. The general rule is price = cost ÷ (1 − target margin).
What is a good gross margin for an online store?
It depends on the category, so compare against sellers like you rather than a single number. What matters is that margin covers platform fees, shipping, ads and returns with something left over, which is why it's worth running your price through a fee calculator too.
Should marketplace fees count in gross margin?
For your own decisions, yes. Accounting definitions vary, but if eBay, Etsy or PayPal take 10–15% of every sale, a 30% margin before fees is closer to 15–20% in your pocket. Add fees to the cost field to see your real margin.
Disclaimer: Estimates for planning only, not accounting or tax advice.