Calculate profit margin from sales margin and sales price
Enter your sales margin
Enter your selling price
Calculate margin rate from sales margin and purchase price
Enter your sales margin
Enter your purchase price
Calculate mark-up from purchase and sales prices
Enter your selling price
Enter your purchase price
What is the margin rate? Definition
Margin rate is a percentage measure of a company’s or salesperson’s profit or loss. It is the comparison between the purchase price and the selling price.
Margin rate is an important measure for a business, as it shows whether or not a company’s sales are profitable.
A high margin rate means that you can spend more on other parts of your business because the sale is profitable. Conversely, a negative mark-up means that your product is not profitable, so you need to stop selling it or cut costs.
Find other commercial calculations on this page.
What is a good margin rate?
The maximum margin level is unlimited. A good mark-up varies from one sector to another. Given a company’s normal expenses, a very good mark-up can be considered to be over 20%.
If the margin rate is over 80%, that’s great.
If your business isn’t profitable enough, and you need to earn more money to keep running your business, increasing your margin is the solution. Increasing margin means making a higher margin per product sold. This can be achieved by reducing the cost of the product, or by increasing the selling price.
Margin rate formulas
You can calculate your margin rate in 3 different ways.
With sales margin and sales price :
( Sales margin X 100 ) / ( Sales price – Sales margin )
With sales margin and purchase price:
( Sales margin X 100 ) / Purchase price
With selling price and purchase price:
(( Selling price – Purchase price ) X 100) / Purchase price
Example of margin rate
Let’s say you’re a company that sells computers.
- You buy your computers for 1000 euros
- You sell them for 1,200 euros
- Your sales margin is 200 euros
We want to calculate the margin rate:
With sales margin and sales price :
(200 X 100) / ( 1200 – 200 ) = 20 %
With sales margin and purchase price:
(200 X 100) / 1000 = 20 %
With selling price and purchase price:
( (1200 – 1000 ) X 100) / 1000 = 20 %