Free calculator
Pricing strategy calculator
Selling price from costs and margin, margin from price, and the difference between margin and markup, the most common pricing mistake.
Selling price from costs and margin
Margin is calculated from the selling price, so you don't add it, you derive it by division.
- Selling price
- — $
Margin from price and costs
How many percent of the selling price stays with you.
- Margin
- — %
Price from markup, and what margin that gives
Markup is calculated from costs, margin from price. The same number, two different results.
- Selling price
- — $
- Corresponding margin
- — %
Margin is not markup
The most common pricing mistake: "I'll take a 40 % margin" and then multiplying costs by 1.4. But that creates a markup of 40 %, not a margin. The difference comes straight out of your profit:
- Markup is calculated from costs: costs of 600 Kč + 40 % = a price of 840 Kč.
- Margin is calculated from the selling price: for 40 % of the price to remain, it must be
600 / (1 − 0.40) = 1,000 Kč.
A 40 % markup corresponds to a margin of only 28.6 %. Whoever confuses the terms sells cheaper than they think, in the example above by 160 Kč per unit.
The three calculations pricing needs
- Price from margin:
price = costs / (1 − margin/100). You divide, you don't add. That's why a hundred-percent margin is impossible: it would mean zero costs. - Margin from price:
margin = (price − costs) / price × 100. A check of how much of the actual price stays with you. - Converting markup to margin: calculate the price from the markup and the margin from that. That's exactly what the third variant of the calculator does.
Price is more than a formula
Costs and margin set the lower bound of a price; the upper bound is set by customer value and the market. Premium brands price on value far above costs, a penetration strategy goes temporarily below the usual price for market share. The formula makes sure you don't lose money by mistake on either strategy.
Where to go next
You can do the maths. But what next? How to turn customers who bought once into customers who buy repeatedly is the subject of the book Opakovaný prodej.