How do I calculate profit margin?

Take the selling price without VAT, subtract every cost of the order (product, shipping, packaging, payment fees, refunds and ads) to get profit, then divide profit by the price without VAT. A £30 sale including VAT is £25 without VAT. With £14.70 of costs, profit is £10.30 and the margin is 41.2%.

What is the difference between margin and markup?

Margin is profit as a share of the selling price (without VAT). Markup is how much you add on top of the product cost, as a share of that cost. A product that costs £10 and sells for £20 without VAT has a 100% markup but a 50% margin, before other costs.

How do I convert markup to margin?

Margin = markup ÷ (1 + markup). A 50% markup is a 33.3% margin, a 100% markup is a 50% margin and a 200% markup is a 66.7% margin. To go the other way, markup = margin ÷ (1 − margin).

How do I work out a selling price from a target margin?

Add up your costs per order, then divide by (1 − the margin you want − your refund rate − your payment fee %), and add VAT on top if you are registered. The calculator's Price for my margin tab does this for you and rounds to .99.

Should I use the price with or without VAT?

Enter the price the customer pays. If you are VAT registered, tick the VAT box and the calculator takes the VAT out first, because VAT is not your money. Margin is always worked out on the price without VAT.

What is a good profit margin for an online shop?

It depends on the product, but after product cost, shipping, payment fees and returns, many DTC brands aim for 30% or more before advertising, so there is room to pay for ads and still make a profit. Under 15% leaves very little room for ads.

How much can I spend on ads per order?

Your break-even ad spend per order is your profit before advertising. Spend more than that to win an order and you lose money on it, unless the customer buys again. The ROAS calculator turns this into the break-even ROAS for Google and Meta.

How do returns affect my margin?

Refunded orders lose the revenue but you usually still pay for shipping, packaging and payment fees. Adding your returns or refunds rate shows the margin you really keep.

Free tool

Free Profit and Margin Pricing Calculator

See what you really make on each order after VAT, shipping, payment fees, returns and ads. Or set the margin you want and get the price to charge. No sign-up.

By Anthony McGrath · Updated 16 October 2026

Your numbers

Selling price (what the customer pays)

Product cost

What one unit costs you to make or buy.

Shipping you pay

Per order, after anything the customer pays.

I'm VAT registered (the price includes VAT)

Optional tweaks: packaging, ads, fees, VAT rate, returns, volumeOptional

The calculator works with the boxes above. Add these for a more exact answer.

Packaging

Ad cost per order

Leave at 0 to see profit before ads.

Payment fee

Plus per order

Use your payment provider's rate.

VAT rate

Returns and refunds

Share of orders refunded.

Apps and platform, per order

Other costs, per order

Pick and pack, inserts, warehouse.

Orders a month

Your results

Estimates for planning, based on the numbers you enter. Nothing you type leaves your browser.