Margin & markup pricing: practical guide

What to prepare

• Gather supplier quotes, invoices, time records and the actual scope of the job or business decision.
• Separate revenue from VAT, direct costs from overheads, and profit from the timing of cash receipts.
• Use the same accounting period and currency for related inputs.

Understand the inputs

Existing selling price (€)

Shown when Analyse an existing selling price is true.

The calculation method

Target price = cost ÷ (1 − margin). Gross margin divides profit by revenue; markup divides profit by cost.

Worked example

Illustrative inputs and their result.

Example inputs

Unit cost excluding VAT (€)

100

Target gross margin (%)

30

Analyse an existing selling price

No

Calculated example result

Selling price

€142.86

Profit per unit

€42.86

Gross margin

30%

Markup on cost

42.86%

How to interpret the result

A profitable estimate can still create a cash shortfall. Read the cost and timing assumptions as well as the headline profit, price or return; the result is a scenario, not a sales forecast.

Keep the scope constant while changing price, volume, supplier cost or time. A lower-sales or higher-cost case helps show whether the decision depends on an optimistic assumption.

Common mistakes to avoid

• Do not confuse markup on cost with margin on selling price.
• Include work that is easy to miss, such as travel, setup, rework and administration, where the model supports it.
• Do not treat tax collected or an unpaid invoice as freely available cash.

Assumptions and sources

Use consistent VAT-exclusive amounts. Gross profit does not deduct overheads. A loss remains a negative profit and margin.

Related business guides

• Cost of goods sold: practical guide
• Break-even analysis: practical guide
• Irish corporation tax: practical guide
• Customer acquisition & value: practical guide
• Stock turnover & DSO: practical guide
• Asset depreciation: practical guide