Business
Invoicing, margin & GST calculators
Price for a Target Margin (Markup from Margin)
If you know the profit margin you want to hit, you cannot just add that percentage to your cost — that would be a markup, and a markup and a margin are not the same thing. To price for a target margin, divide the cost by (1 − margin): price = cost / (1 − margin%). For a 40% target margin on a $80 cost, the correct price is 80 / (1 − 0.40) = $133.33, which works out to a 66.7% markup — not the 40% you might have added by mistake. This mode takes your cost and desired margin and returns the exact selling price plus the equivalent markup, so you set the price that actually delivers the margin you planned. Free, no login.
Reverse formula: price = cost / (1 − margin%) — the price that yields your target margin
- Equivalent markup: markup = margin / (1 − margin) — always larger than the margin
- Common error to avoid: adding the margin % to cost gives a markup, NOT the target margin
- Worked example — cost $80, target margin 40%: price = 80 / 0.60 = $133.33 (66.7% markup)
- Worked example — cost $80, target margin 20%: price = 80 / 0.80 = $100.00 (25% markup)
- Cross-check: at $133.33 the profit is $53.33, and 53.33 / 133.33 = 40% — the target margin
- Guard: a target margin of 100% or more is impossible — the price would be infinite or negative
Frequently asked questions
What price do I need for a 40% profit margin?
Divide your cost by (1 − 0.40). For an $80 cost that is 80 / 0.60 = $133.33. Check it: the profit is $133.33 − $80 = $53.33, and $53.33 ÷ $133.33 = 40%, the margin you wanted. Note that $133.33 is a 66.7% markup on cost — so if you had simply added 40% to the $80 cost you would have priced at $112 and taken only a 28.6% margin, well short of your goal. Always use price = cost / (1 − margin) when you are pricing to a margin target.
Why can't I just add my target margin percentage to the cost?
Because adding a percentage to cost produces a markup, and markup is measured against cost while margin is measured against the (higher) selling price. Adding 40% to an $80 cost gives $112, which is a 40% markup but only a 28.6% margin. To actually achieve a 40% margin you must divide by (1 − 0.40), giving $133.33. The gap between the two grows as the target margin rises, which is why pricing "by adding the margin" quietly leaves money on the table.
Can I target a 100% margin?
No. The formula price = cost / (1 − margin) divides by zero at a 100% margin, which means the required price is infinite; above 100% the divisor turns negative and the result is meaningless. A margin can approach but never reach 100%, because the profit can never exceed the selling price it is measured against. Markup, by contrast, has no ceiling — a 100% margin corresponds to an infinite markup, and even a modest 60% margin is already a 150% markup.