How to calculate selling price from margin
Selling price = Cost ÷ (1 − Desired margin % ÷ 100)
Profit per unit = Selling price − Cost
Markup % = (Profit ÷ Cost) × 100
The key is dividing by (1 − margin), not multiplying by (1 + margin). Multiplying gives you a markup, which produces a smaller margin than you intended.
Worked example
A ceramic planter costs you $24 landed, and you want a 40% profit margin.
| Step | Calculation | Result |
|---|
| Selling price | $24 ÷ (1 − 0.40) | $40 |
| Profit per unit | $40 − $24 | $16 |
| Markup | $16 ÷ $24 | 66.7% |
Check: $16 is 40% of $40, so the margin is exactly what you wanted.
Here is the common mistake for comparison. Adding 40% to cost gives $24 × 1.40 = $33.60. Profit is $9.60, which is only a 28.6% margin. On every unit, you would leave $6.40 on the table compared with your plan.
Margin vs markup when setting prices
- Margin is profit as a share of the selling price. It is the number you want for planning, because ad spend, discounts and fees are all measured against revenue.
- Markup is profit as a share of cost. It is often how suppliers and wholesalers talk about pricing.
To hit a target margin, you always need a larger markup:
| Desired margin | Required markup |
|---|
| 20% | 25% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
| 60% | 150% |
If you already have a price and want to check it, use the profit margin calculator. If you price by markup, the markup calculator shows the resulting margin.
How to choose your target margin
The right margin depends on what each sale has to pay for:
- Advertising. If most orders come from paid search and Shopping, your margin must cover the ad cost per order and leave profit. The margin you pick sets your break-even ROAS: at 40% it is 2.5. Check it with the break-even ROAS calculator.
- Costs not in the product cost. Payment fees, free shipping, packaging and returns all come out of margin. Either add them to cost or choose a higher target margin.
- Planned discounts. If you regularly run 20% off sales, the everyday margin needs to absorb that.
- Market prices. Shoppers compare prices directly in Google Shopping. If the price your target margin produces is well above competitors, expect lower click-through and conversion rates.
Tips for setting selling prices
- Use full landed cost including freight, duties and inbound shipping.
- Round to a sensible price point after calculating. If the math gives $39.18, choose $39 or $39.99, and check how the rounding changes your margin.
- Use different margins per category. Accessories and add-ons can often carry higher margins than your core, most-compared products.
- Revisit prices when costs change. A supplier increase on a fixed price quietly erodes margin.
- Tag products by margin with custom labels in Merchant Center so you can give higher-margin items more aggressive bids in Shopping and Performance Max.