Margin / Markup / Break-Even Calculator

Overview

Margin, markup, and break-even are three of the most-misused terms in small-business finance. Margin is profit as a percentage of selling price; markup is profit as a percentage of cost. The same dollar profit produces very different percentages depending on which denominator you pick — a 50% markup yields only a 33% margin, and a 100% markup is a 50% margin. Confusing the two is a reliable way to undersell a product.

Break-even is the related question of "how many units do I need to sell to cover my fixed costs?" It depends on the contribution margin per unit — the amount each sale puts toward fixed overhead. This calculator solves all three: it converts margin to markup and back, and computes the break-even unit volume from a fixed-cost figure, a selling price, and a variable cost per unit.

How it works

Margin = (price − cost) / price. Markup = (price − cost) / cost. The two are related by margin = markup / (1 + markup) and markup = margin / (1 − margin). Break-even units = fixed_costs / (price − variable_cost); break-even revenue equals that quantity times price. Target-profit volume adds the desired profit on top: (fixed_costs + target_profit) / contribution_margin.

Examples

• An item costing $40 sold at $100: profit $60, margin 60%, markup 150%.
• An item costing $40 sold at $60: profit $20, margin 33.3%, markup 50%.
• A SaaS at $25/month with $5 variable cost (payment processing, support) and $20,000/month of fixed cost: contribution margin $20, break-even 1,000 subscribers.
• The same SaaS targeting $5,000/month profit needs (20,000 + 5,000) / 20 = 1,250 subscribers.
• An e-commerce item bought for $12 and sold at $30: 60% markup, 60% (margin) is actually 60% markup; the margin is 18/30 = 60%. Margin and markup happen to converge here because the markup math 18/12 = 150% shows the trap of treating them interchangeably.

FAQ

Should I price by margin or by markup?
Price by margin — that is what investors and accountants read. Use markup as a quick mental model when sourcing inventory.

Why is the break-even unit volume sensitive to small price changes?
Because contribution margin is the denominator. A 10% price increase often cuts break-even volume by more than 10%.

What counts as fixed versus variable cost?
Fixed costs do not change with volume in the short run (rent, salaries). Variable costs scale per unit (materials, transaction fees).

How is gross margin different from net margin?
Gross margin uses only COGS. Net margin subtracts all operating expenses, interest, and taxes.

Can break-even be negative?
If price is below variable cost the contribution margin is negative — no volume will reach break-even. Re-price or cut variable costs first.

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