Enter what an item costs you and what you sell it for, and this profit margin calculator shows the margin and the markup side by side, in Saudi riyals, because confusing the two is the most common pricing mistake. The Price from margin tab works backwards: give it a cost and the margin you want, and it returns the selling price with 15% VAT and a rounded shelf price. Distributors get a wholesale tiers tab, and shops can price a whole product list in one go.
How to calculate profit margin and profit percentage
Profit margin is profit as a share of the selling price: out of every SAR 100 you sell for, how much is left after cost. Markup is profit as a share of cost: how much you added on top of what you paid. The profit in riyals is the same in both; only the number you divide by changes.
Profit = Price − Cost · Margin = Profit ÷ Price · Markup = Profit ÷ Cost
Margin vs markup: why a 25% markup is only a 20% margin
Adding 25% to a cost of SAR 80 adds SAR 20, because 25% of 80 is 20. Margin is measured against the selling price of SAR 100, so those 20 riyals become 20% of it. The same profit is divided once by a small number (cost) and once by a bigger one (price), which is why markup is always the higher figure.
The trap: a retailer decides on "a 25% margin", adds 25% to cost and ends up with 20%. For a real 25% margin, divide the cost by 0.75: 80 ÷ 0.75 = 106.67, a difference of SAR 6.67 on every item.
| Profit margin | Equals a markup of | Price of an item costing 100 |
|---|---|---|
| 10% | 11.11% | 111.11 |
| 20% | 25% | 125.00 |
| 25% | 33.33% | 133.33 |
| 30% | 42.86% | 142.86 |
| 40% | 66.67% | 166.67 |
| 50% | 100% | 200.00 |
Markup = Margin ÷ (1 − Margin) · Margin = Markup ÷ (1 + Markup)
Pricing products from cost and a target margin
Start with the full landed cost of the item: purchase price, freight, customs duty if any, and packaging. Then decide the margin you need to cover rent and salaries and still leave a profit. The selling price is the cost divided by (1 − margin); if you think in markup, multiply the cost by (1 + markup).
Price = Cost ÷ (1 − Margin) · Price = Cost × (1 + Markup)
Margin is always worked out on the price before VAT, because VAT is collected from the buyer and paid over to the Zakat, Tax and Customs Authority in Saudi Arabia; it is never your profit. That is why the tool finds the net price first, adds 15%, and only then rounds the inclusive price the customer sees.
Charm pricing endings such as 9.95
Many shops price at .95, .99 or a whole riyal. The calculator always rounds up, so the margin never drops below the one you set, and it shows the actual margin after rounding. On cheap items rounding can lift the margin by several points, so check the price before you print the label.
Wholesale price by quantity tiers
Wholesalers and distributors accept a lower margin as the quantity grows, because a big order covers the cost of the visit and the delivery in one go. In the Wholesale tiers tab you enter the cost, then for each tier the quantity it starts at and the margin you accept, and the unit price and profit for each tier appear.
Pricing a product list in one go
In the Product list tab you type items and their costs, or upload a file with the item name in column A and the cost in column B, and every item is priced at the same margin. Download the list in Excel and it keeps real formulas: one margin cell that reprices everything when you change it, plus empty rows ready for items you add later.
Gross profit and net profit
Gross profit is sales minus the cost of goods sold, which is what this tool works out per item. Net profit comes after every expense is deducted: rent, salaries, electricity, card payment fees. So gross margin is always higher than net margin, and it has to be big enough to cover the expenses before any profit is left.
Common pricing mistakes
- Adding a percentage to cost and calling it margin, so the real margin is lower.
- Working out margin on the VAT-inclusive price, which makes profit look bigger than it is.
- Pricing from the purchase price alone, without freight, packaging and shrinkage.
- Offering a discount close to the margin, so the item sells at cost or at a loss. The discount calculator shows what a promotion does to your margin before you announce it.
- Leaving prices unchanged after purchase costs rise, so the margin shrinks without anyone noticing.
What to do with the result
Compare the margin you got with what you need to cover the store's monthly expenses, then set the shelf price. Download the working as a PDF to show your partner, or the product list in Excel to keep editing it. To price restaurant dishes from their ingredients, use the food cost calculator.
When costs change with every shipment
Pricing one item takes a minute. A store with hundreds of items, where purchase costs move with every supplier invoice, needs each item's margin from actual sales rather than an old spreadsheet. At Microtec we offer retailers in Saudi Arabia O-Green, a cashier and point of sale system for retail. Try it with your own items and current prices.