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Profit margin and break-even

For shops, online sellers and small businesses: your margin and markup, the price for the margin you want, and how many sales you need to break even.

Profit and margin

Profit per item
40.00
Profit margin
40.0%
Markup
66.7%

Price for a target margin

Price needed
100.00

115.00 including 15% VAT

Break-even point

Units to break even
500
Revenue to break even
50,000.00
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Formulas

  • Margin = (price − cost) ÷ price
  • Markup = (price − cost) ÷ cost
  • Price for a target margin = cost ÷ (1 − margin)
  • Break-even units = fixed costs ÷ (price − variable cost)

Example

You buy at 60 SAR and sell at 100 SAR before VAT, with 20,000 SAR of fixed costs a month:

  • Profit per item: 40 SAR, a 40% margin and 66.7% markup
  • Break-even: 20,000 ÷ 40 = 500 sales a month

Remember to add 15% VAT to prices shown to customers if you’re VAT-registered; see the VAT calculator.

Profit margin and break-even: common questions

What’s 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. Buying at 60 and selling at 100 is a 40% margin but a 66.7% markup.

How do I price for a 40% margin?

Divide the cost by (1 − 0.40). A cost of 60 needs a price of 100 before VAT, or 115 with 15% VAT.

What is the break-even point?

The number of sales where profit covers your fixed costs: fixed costs ÷ (price − variable cost per unit).

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