Profit margin formulas
- Gross profit = sales − cost of goods sold; gross margin = gross profit ÷ sales × 100.
- Net profit = gross profit − running expenses; net margin = net profit ÷ sales × 100.
- Price for a target margin = unit cost ÷ (1 − margin).
Worked example
A shop with monthly sales of Rs 1,500,000, cost of goods Rs 950,000 and expenses of Rs 300,000.
- Gross profit: Rs 550,000, so gross margin = 36.7%
- Net profit: Rs 250,000, so net margin = 16.7%
Work from cost instead with the markup calculator, add or remove GST with the sales tax calculator, or check marketplace fees with the Daraz commission calculator.
Frequently asked questions
How do I calculate profit margin?
Profit margin = profit ÷ sales × 100. Gross margin uses sales minus cost of goods; net margin also subtracts running expenses such as rent, salaries, bills and ads.
What is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is profit as a share of cost. Buying at Rs 1,200 and selling at Rs 1,800 is a 50% markup but a 33.3% margin.
What is a good profit margin for a shop in Pakistan?
It varies by trade. Grocery and mobile phone retail often run on single-digit net margins, while clothing, cosmetics and accessories can reach 20–40% gross. Compare against your own expenses rather than one fixed number.
Should sales tax be included in revenue?
No. If you charge GST, take it out first – it belongs to the government. Use the sales tax calculator to remove 18% from tax-inclusive sales.
How do I price a product for a 35% margin?
Divide cost by (1 − 0.35). A product costing Rs 1,200 needs a price of about Rs 1,846 for a 35% margin.
Last reviewed: October 2026