The formulas
- Profit = price − cost (both excluding GST/VAT)
- Margin % = profit ÷ price × 100
- Markup % = profit ÷ cost × 100
- Price for a target margin = cost ÷ (1 − margin)
- Break-even sales = fixed costs ÷ (price − cost per sale)
Break-even is the point where your income equals your expenses (business.gov.au: key financial terms). For a deeper walk-through, see business.gov.au: break-even analysis and the US SBA break-even calculator.
Quick pricing tips
- Price from margin, not markup, so a 30% target really means 30% of every sale.
- Know your break-even: once you pass it each month, most of each extra sale is profit.
- Raising prices beats cutting costs more often than owners expect. Run your numbers with a 5% higher price and see.
More free tools: GST calculator (also India, NZ and Canada) and the invoice generator.
Quick answers
What is the difference between margin and markup?
Both use the same profit, divided by different things. Margin is profit as a share of the selling price; markup is profit as a share of the cost. Something that costs $60 and sells for $100 has a $40 profit: a 40% margin and a 67% markup.
How do I work out the price for a 30% margin?
Divide the cost by (1 − 0.30). A $70 cost needs a $100 price for a 30% margin. Adding 30% to the cost ($91) only gives a 23% margin, a common pricing mistake.
Should I include GST in my margin?
No. If you’re registered for GST or VAT, the tax in your price belongs to the government. Take it out first, then work out your margin. Tick "Prices include GST / VAT" and the calculator does it for you.
What is a break-even point?
The point where your income equals your expenses (business.gov.au’s definition). Divide your monthly fixed costs by what each sale leaves after its own costs, and you get the number of sales you need each month before you make any profit.