How to Figure out the Margin in Retail

Higher margins mean higher profits.

One of the business metrics students must learn in basic classes is the retail margin. The margin measures the percentage of the selling price that the company keeps as profit. For example, if a company sells an item for $10 and keeps $5 as profit, the profit margin would be 50 percent. Be careful not to confuse margin with markup. The markup measures the profit as a percentage of the cost of the item rather than the selling price.

Things You'll Need

• Calculator

Instructions

1. Subtract the price you pay for the item from the price you sell the item to find the profit. For example, if you pay $19 for an item and sell it for $34, subtract $19 from $34 to find your profit equals $15.

2. Divide your profit by your selling price to find the margin shown as a decimal. In this example, divide $15 by $34 to get 0.4412.

3. Multiply the margin shown as a decimal by 100 to find the retail margin shown as a percentage. Completing this example, multiply 0.4412 by 100 to find your margin equals 44.12 percent.

References

• University of Tennessee: Selling Price, Gross Margin & Mark-Up Determination; 1998
• Building Trade.org: Markup or Margin; 2005