Profit Margin Calculator South Africa
Calculate profit margin and markup from cost and selling price
This calculator provides estimates only. Actual business costs may include additional overhead not reflected here.
Frequently Asked Questions
What is the difference between profit margin and markup?
Profit margin is the percentage of the selling price that is profit. Markup is the percentage added on top of the cost price. A 50% markup gives a 33.3% margin.
What is a good profit margin for a South African business?
Net profit margins vary by industry: retail 2-5%, restaurants 3-9%, services 10-20%, tech/software 15-40%. A margin above 10% is generally considered healthy.
How do I calculate profit margin?
Profit Margin = (Selling Price − Cost Price) ÷ Selling Price × 100. For example, if cost is R500 and selling price is R750, margin = 33.3%.
How do I calculate markup?
Markup = (Selling Price − Cost Price) ÷ Cost Price × 100. For example, if cost is R500 and selling price is R750, markup = 50%.
Should I use VAT-inclusive or VAT-exclusive prices?
For margin calculations, use VAT-exclusive prices. If you're registered for VAT, your selling price to consumers includes VAT, but your margin calculation should exclude it.
What is gross profit vs net profit?
Gross profit is revenue minus the cost of goods sold. Net profit is gross profit minus all other expenses (rent, salaries, utilities, etc.).
How does VAT affect my pricing?
If you're VAT-registered, you charge VAT on top of your selling price. Your margin should be calculated on VAT-exclusive amounts.
What is the average markup in retail?
Retail markups vary widely: grocery stores 20-30%, clothing 50-100%, electronics 15-30%, restaurants 60-300% on food items.
This calculator provides estimates only. Actual business costs may include additional overhead not reflected here.
How the profit margin calculator works
Profit margin is profit divided by the selling price. Markup is profit divided by the cost. They are the same rand amount expressed against a different base, which is why a 40% markup is only a 28,6% margin.
Buy at R100,00 and sell at R140,00: profit is R40,00, the margin is R40,00 ÷ R140,00 = 28.6%, and the markup is R40,00 ÷ R100,00 = 40%.
To hold a 29% margin you must price at cost ÷ (1 − margin) = R100,00 ÷ 0.7143 = R140,00. Multiplying cost by 1,29 instead gives R128,57 — which is a 29% markup, not a 29% margin.
What changes the answer in South Africa
For a VAT-registered business, margin should be calculated on amounts excluding VAT, because the VAT is collected on behalf of SARS and is never profit. Gross margin also excludes the cost of delivery, payment fees and returns, which is why a healthy gross margin can still leave a thin net margin.
Common questions about the profit margin calculator
What is the difference between margin and markup?
Margin divides profit by selling price (28.6% here), markup divides it by cost (40%). A 100% markup is a 50% margin.
How do I price to a target margin?
Divide cost by (1 minus the margin as a decimal). For a 30% margin on R100 cost, price at R142,86 — not R130.
Should I use margin before or after VAT?
Both figures should exclude VAT. Including VAT inflates the selling price and hides how thin the real margin is.