Shopkeeper Guides

Profit Margin vs Markup: A Pakistani Shop Guide

By MayreDukaan Editorial TeamPublished 15 Nov 20264 min read

Illustration: a shop counter with a green cost block topped by a red profit block, a ledger and calculator

Understand profit margin and markup with rupee examples, calculate a selling price, and check whether shop discounts leave enough gross profit.

Profit margin measures profit as a percentage of selling price; markup measures the same profit as a percentage of cost. They are not interchangeable. If a Pakistani shop buys an item for Rs 800 and sells it for Rs 1,000, the profit is Rs 200, the margin is 20% and the markup is 25%.

Use the profit margin calculator to see both percentages side by side. The maths is straightforward, but choosing an honest cost figure is just as important as using the right formula.

Learn the three basic formulas

Profit = selling price − cost.

Margin % = profit ÷ selling price × 100.

Markup % = profit ÷ cost × 100.

The denominator is the difference. Margin asks how much of each rupee of sales remains after the entered cost. Markup asks how much you added relative to that cost. Always write the label beside the percentage when discussing prices with staff or suppliers.

Cost	Selling price	Profit	Margin	Markup
Rs 800	Rs 1,000	Rs 200	20%	25%
Rs 1,000	Rs 1,250	Rs 250	20%	25%
Rs 1,000	Rs 1,200	Rs 200	16.67%	20%

These are worked examples, not recommended margins for any product category. Your shop’s appropriate price depends on its own costs and customers.

Choose what belongs in cost

Start with the supplier price and decide which directly attributable costs you need to include, such as transport or packaging. If a delivery charge covers several products, choose a sensible allocation method and use it consistently. A calculation cannot correct a missing cost.

For example, a product bought for Rs 760 with Rs 40 of allocated packing and delivery has an entered cost of Rs 800. Selling it for Rs 1,000 leaves Rs 200 against that entered cost, not Rs 240. Keep the supplier invoice and allocation note so you can explain the number later.

This product-level result is not automatically your shop’s net profit. Rent, wages, electricity, damaged stock and other business expenses still matter. Keep costs and sales on a consistent tax basis; ask your accountant how recoverable tax should be treated rather than mixing tax-inclusive and tax-exclusive figures.

Use the calculator step by step

Open the profit margin calculator.
Enter the cost per unit using your chosen consistent method.
Enter the selling price per unit.
Read profit, margin and markup together.
If working backwards, enter a target margin to find the required selling price.
Check the result against actual trading costs before changing shelf labels.

The calculation runs in your browser and uses the values you enter. It does not look up wholesale prices, predict demand or decide which margin your shop should charge.

Work backwards from a target margin

The formula is selling price = cost ÷ (1 − target margin ÷ 100). For Rs 800 cost and a 20% target margin, divide 800 by 0.80 to get Rs 1,000. Adding 20% to cost would give Rs 960, which has only a 16.67% margin.

A target margin of 100% is not a valid result for a positive-cost product under this formula. If the calculator cannot produce a sensible answer, check your inputs instead of treating an impossible target as a pricing strategy.

Check discounts before promising them

Suppose the Rs 1,000 item receives a 10% discount. Its sale price becomes Rs 900. Against Rs 800 cost, profit falls to Rs 100 and margin to about 11.11%. A 10% price reduction has halved the original Rs 200 profit in this example.

Use the discount calculator first, then put the reduced price into the margin calculator. For stacked discounts, calculate the second reduction on the already reduced amount. Do not subtract the discount percentage directly from your original margin percentage.

Common mistakes at the counter

Saying “20% profit” without specifying margin or markup.
Comparing a carton cost with a single-item selling price.
Forgetting transport, packing or a known discount.
Using revenue as a synonym for profit.
Assuming a healthy product margin guarantees enough cash for the month.

If cost changes, recalculate before reprinting labels. Keep a short price-change record showing old cost, new cost, selling price and the person who approved it. This makes it easier to investigate discrepancies without guessing which figure was used.

Turn the figures into a shop routine

Review a small group of products regularly rather than relying on memory. MayreDukaan’s shop management overview explains its product, billing and stock records; those records can support a more organised pricing routine. Start with the profit margin calculator, label both percentages clearly, and make each pricing decision from the same cost basis.

Frequently asked questions

Is 25% markup the same as 25% margin?

No. Rs 800 cost and Rs 1,000 selling price give a 25% markup but a 20% margin.

Does the result equal net shop profit?

Not automatically. The calculator only subtracts the cost you enter; other business expenses may still need deduction.

How do I price for a target margin?

Divide cost by one minus the target margin expressed as a decimal. A cost of Rs 800 at 20% margin gives Rs 1,000.

Useful on MayreDukaan

Sources

Facts last checked against these sources on 15 Nov 2026, 07:43 Pakistan time.

Images: Illustration created for MayreDukaan (not a photo)