Profit, margin and markup are different
Profit is revenue minus cost. Margin expresses profit as a percentage of the selling price: margin = profit ÷ selling price × 100. Markup expresses it as a percentage of cost: markup = profit ÷ cost × 100. A product bought for Rs 800 and sold for Rs 1,000 has Rs 200 profit, a 20% margin and a 25% markup. Mixing these two up is the most common pricing mistake among small sellers.
Break-even analysis
Break-even is the sales volume at which total revenue equals total cost: fixed costs divided by the contribution per unit (price minus variable cost). Below it you lose money; above it every extra unit adds profit. Knowing it before you commit to rent, stock or advertising can prevent expensive surprises.
Tips for small businesses
- Include delivery, packaging, payment fees and returns in your cost.
- Add GST or other taxes only where they apply and keep them separate from profit.
- Review prices when supplier costs change.
To turn percentages into rupees, use the percentage calculator; to bill clients, try the invoice generator.
Worked example
A shop buys 100 shirts at Rs 800 and sells them at Rs 1,200, paying Rs 5,000 for delivery and Rs 8,000 in other expenses. Revenue is Rs 120,000, cost of goods is Rs 80,000, so profit before tax is Rs 120,000 - 80,000 - 5,000 - 8,000 = Rs 27,000. The margin is 22.5% of revenue and the markup on cost is 33.75%. Break-even is the point where contribution covers fixed costs: here with Rs 13,000 in fixed costs and Rs 400 contribution per shirt, you need 33 shirts to break even.
Pricing tips for small sellers in Pakistan
- Include packaging, courier, payment-gateway fees and returns in your cost.
- Use a target margin, not a copied competitor price.
- Review prices when the dollar rate or supplier prices change.
- Track GST and income tax separately so profit is not overstated.
Next steps
Create a bill for your customer with the invoice generator, check the effect of discounts with the percentage calculator, and judge a bigger investment with the ROI calculator. If you need finance, estimate repayments with the loan EMI calculator. If you import stock, convert prices with the currency converter, and for taxes on your own income see the income tax 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 the cost.
How do I find the selling price for a target margin?
Divide the cost by (1 minus the margin as a decimal). For a 25% margin on a Rs 750 cost, the price is Rs 1,000.
What is break-even?
The point where revenue equals total costs so there is neither profit nor loss.
Does the calculator include tax?
Only if you include it in your inputs. Enter figures after tax as appropriate.