Margin and markup are not the same
This is the most common pricing mistake in small businesses. Markup is profit as a percentage of cost. Margin is profit as a percentage of the selling price. For the same sale, markup is always the bigger number, so a shopkeeper who "adds 35%" to cost is not making a 35% margin.
Profit = selling price − cost
Margin = profit ÷ selling price × 100
Markup = profit ÷ cost × 100
Price for a target margin = cost ÷ (1 − margin)Worked example
Typical margins in Indian retail
| Business | Typical gross margin |
|---|---|
| Grocery / kirana | 8–15% |
| Electronics and mobiles | 5–12% |
| Clothing and fashion | 35–60% |
| Home bakery and packaged food | 40–65% |
| Handmade and craft products | 50–70% |
| Services (design, consulting) | 60–80% |
These are rough ranges. Your right margin depends on your costs, competition and how much of your own time the product takes.
Gross margin vs net margin
This calculator gives gross margin: price minus the direct cost of the item. Your net margin is what's left after rent, salaries, electricity, marketing, delivery and platform commissions. A 40% gross margin can easily become 10% net. For a full picture including overheads and commissions, use the product pricing calculator, and check how many sales you need to cover fixed costs with the break-even calculator.
Raising prices without losing customers
Small, regular price rises (3–5% once or twice a year) are far easier for customers to accept than a single large jump. Pair them with something visible: better packaging, a loyalty discount for regulars, or a new premium option. Watch your weekly sales for a month after each change; if volume holds, your margin has improved for free.
Frequently asked questions
What is a good profit margin?
It varies by industry: under 15% is common in groceries and electronics, while food, fashion and services often run at 40% or more gross margin.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup equals a 33.3% margin; a 100% markup equals a 50% margin.
Should GST be included when calculating margin?
No. Use prices and costs without GST, because GST collected is passed on to the government, not kept as profit.