Include every cost of delivering one unit: materials, packaging, payment fees, shipping and direct labour.
Margin vs markup
- Gross margin = (Price − Cost) ÷ Price. It answers: what share of every sale do I keep?
- Markup = (Price − Cost) ÷ Cost. It answers: how much did I add on top of cost?
A product costing $50 and selling for $100 has a 100% markup but only a 50% margin. If you want a 50% margin and add a 50% markup by mistake, you'll price at $75 and keep 33% — a third less than planned on every sale.
Price from a target margin
Price = Cost ÷ (1 − target margin). For a 60% margin on a $20 cost: $20 ÷ 0.4 = $50.
Typical gross margins vary widely: grocery retail often runs in the 20–30% range, restaurants 60–70% on food cost alone, and software or services can exceed 70%. Compare yourself with your own industry, not a general rule.
Next, check how many sales you need with the break-even calculator.