Gross profit calculator
Gross profit (GP) is what is left after you pay for the thing you sold. Type in a cost and a selling price to see the profit, the margin and the markup, or start from the margin you want and get the selling price. Use prices without VAT. Nothing you enter leaves this page.
Margin and markup are not the same thing
Buy something for R100 and sell it for R150. The gross profit is R50 either way, but the markup is 50% (R50 on the R100 cost) while the margin is 33% (R50 out of the R150 price). Suppliers and price lists usually talk markup. Accountants, banks and tender scorers talk margin. Mixing them up is the most common reason a business prices too low.
To hit a margin, divide the cost by one minus the margin. For a 40% margin on a R100 cost, R100 divided by 0.6 is R166.67. To apply a markup, multiply the cost by one plus the markup. A 40% markup on R100 is R140, which is only a 28.6% margin.
Gross profit only takes off the cost of what you sold. Rent, salaries, bank charges, fuel and your own pay come out after that, so the gross profit across all your sales has to be big enough to cover them. That is the number to watch every month.
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Make the invoiceFrequently asked questions
What is the difference between margin and markup?
Margin is the profit as a share of the selling price. Markup is the profit as a share of the cost. Buy for R100 and sell for R150: the profit is R50, the markup is 50% and the margin is 33%. Because they use different bases, the same deal always shows a bigger markup than margin.
Is gross profit before or after VAT?
Work it out on prices excluding VAT. VAT is collected for SARS and is not your income, so a margin worked out on VAT-inclusive prices looks better than it really is.
What is a good gross margin?
It depends on the trade. Retail often runs between 25% and 50%, food and restaurants around 60% to 70% on the plate, and services higher because there is little cost of sales. What matters is that the gross profit covers rent, salaries and the rest with something left over.
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Keep exploring
Arithmetic only. Margin is profit over selling price; markup is profit over cost. VAT at 15% shown for reference.