How do I use the profit margin calculator?
- Enter your cost per item or job.
- Enter your selling price (before VAT).
- Press Calculate margin and compare margin with markup.
Why do margin and markup get confused?
Both compare profit with a price, but against different bases. Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A product that costs AED 100 and sells for AED 150 has a 50% markup but a 33.3% margin. Pricing with markup while targeting a margin is one of the most common reasons small businesses earn less than they expect.
| Markup | Margin | |
|---|---|
| 25% | 20% | |
| 50% | 33.3% | |
| 100% | 50% | |
| 200% | 66.7% | |
Which costs should go into the calculation?
For gross margin, include everything directly tied to the sale: product or material cost, packaging, payment processing fees, delivery and marketplace commission. For net margin, also include overheads such as rent, salaries, software and marketing. Use figures excluding VAT on both sides, since VAT is collected for the tax authority.
How do I use margin to set prices?
Decide the margin you need, then work backwards: price = cost ÷ (1 − margin). Check it against what customers will pay and what competitors charge. If the price is too high, the problem is cost, not margin. Before any promotion, recalculate the margin at the discounted price — a 20% discount on a product with a 30% margin removes two-thirds of the profit.
Profit margin calculator: frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of cost. A 50% markup is only a 33% margin.
Should I include VAT?
No. Use prices before VAT, because the 5% VAT you collect is owed to the FTA, not profit.
What is profit margin?
Profit as a percentage of the selling price.
What is a good profit margin?
It varies by industry. Compare with your own costs and competitors.
How do I set a price for a target margin?
Price = cost ÷ (1 − target margin). For a 40% margin on AED 60 cost, the price is AED 100.
What costs should I include?
For gross margin, the direct cost of the product. For net margin, also overheads, fees and delivery.
How do discounts affect margin?
A discount comes straight out of profit, so a 10% discount on a 30% margin product cuts profit by a third.
How do marketplace fees affect margin?
Add the marketplace commission and payment fees as costs per sale.
Are these calculations based on UAE rules?
Where a UAE rule applies (VAT, labour law, mortgage limits) the tool follows it and names the source. Rules change, so confirm important figures with the relevant authority.
Is the profit margin calculator free?
Yes. It is free with no sign-up and no usage limits for normal use.