Start with consistent inputs
Pricing calculations become misleading when revenue and cost describe different things. Compare the same quantity, time period and tax treatment. If revenue excludes sales tax, cost should normally exclude recoverable input tax too. Include non-recoverable taxes where they genuinely form part of your costs.
For a product, your cost basis might include purchase price, inbound freight and packaging. For a service, it might include delivery labour and subcontractors. Decide whether payment fees, returns and support belong in the model, then apply that choice consistently. The calculator cannot distinguish gross profit from net profit unless you choose the relevant costs.
Percentage: a share of a base
The percentage tool calculates amount × percentage ÷ 100. An illustrative 12,500 revenue base at 30% gives 3,750. This is useful for allocating budgets, estimating a commission or setting aside a proportion of receipts. It does not calculate percentage change between two values.
For percentage change, subtract the old value from the new value, divide by the old value, then multiply by 100. Moving from 80 to 100 is a 25% increase, not 20%. A starting value of zero makes that change formula undefined; use the absolute difference instead.
Margin and markup use different denominators
Profit is revenue minus cost. Margin = profit ÷ revenue × 100, while markup = profit ÷ cost × 100. With a hypothetical cost of 60 and selling price of 100, profit is 40, margin is 40%, and markup is approximately 66.67%. The same transaction has two different percentages because the denominator changes.
The margin calculator accepts revenue and cost. The markup calculator instead accepts cost and your intended markup percentage, then produces a selling price. This distinction matters when a supplier offers a “30% uplift” but your business requires a 30% margin. Those targets are not interchangeable.
To price for a target margin, use cost ÷ (1 − target margin as a decimal). A cost of 70 at a 30% target margin needs a selling price of 100. Adding 30% to 70 gives 91 and a margin of only about 23.08%. A target margin of 100% cannot be reached with a positive cost under this formula.
Discounts consume profit faster than revenue
The discount tool subtracts a percentage of the original price. For an illustrative list price of 100 and cost of 60, a 20% discount creates a selling price of 80. Profit falls from 40 to 20: the price fell by one fifth, but profit per unit halved.
Under unchanged costs, you would need twice as many units to preserve the same total gross profit. That comparison ignores extra fulfilment capacity, overtime, returns and marketing expense. A discount can still be sensible for surplus inventory or customer acquisition, but the volume assumption deserves as much attention as the headline offer.
Successive discounts multiply rather than simply add. A 10% discount followed by another 10% leaves 81% of the original price, an overall reduction of 19%. Apply the calculator twice if your promotion has sequential reductions.
Choose a practical pricing method
Cost-plus pricing is easy to explain and update, but it can ignore what customers value. Target-margin pricing protects a chosen ratio, yet still depends on accurate cost allocation. Market-based pricing reflects alternatives available to buyers, but copying a competitor does not establish whether your own operation is profitable.
Use these methods as checks rather than competing truths. Calculate a sustainable floor, compare the value of your offer, then model a realistic discount. Separate gross margin from contribution after variable selling costs, and distinguish both from operating profit after fixed overhead.
Turn a result into a decision
Save a base case, a promotional case and a higher-cost case with clear history labels. Keep the unit, tax basis and cost assumptions in your records. Round displayed figures for discussion, but avoid repeatedly rounding intermediate calculations. Before publishing prices, check contractual terms, local tax rules and whether delivery charges change the amount customers actually pay.