GP Calculator NZ
Gross profit (GP) is what is left from a sale after you pay for the goods. Margin is GP as a share of the price. Markup is GP as a share of the cost. Example: buy for $60, sell for $100 before GST. GP is $40, margin is 40% and markup is 67%. Type your own numbers into the calculator.
Type your cost and price to see gross profit, margin and markup, with or without GST. Free for NZ small businesses. A planning tool, not accounting advice.
Margin and markup are not the same number
Take the figures this calculator opens with. A product costs you $7.50 excluding GST and you sell it for $14.99 including GST. Strip the GST out and you keep $13.03, so the gross profit on that sale is $5.53.
That one sale has two percentages attached to it. Gross profit is 42.5% — the profit as a share of what the customer paid. Markup is 73.8% — the same profit as a share of what the stock cost you. Same money, same sale, different denominator. Markup is always the larger of the two, and the gap widens as the margin gets fatter.
The mistake that costs the most
If you want a 45% margin, adding 45% to the cost does not get you there. On a $7.50 cost that gives a sell price of $10.88 excluding GST and a gross profit of only 31.0% — short of the target by 14.0 points.
On one item the error is small enough to survive. Across a whole price list it is the difference between covering the overheads and not, and it stays invisible until the year-end accounts arrive.
Working back from the margin you want
Divide rather than multiply: take the cost and divide it by one minus the margin you want. For 45% that is $7.50 ÷ 0.55 = $13.64 excluding GST, or $15.68 including GST on the shelf. Type a GP margin into the calculator above and the retail price moves with it.
Which number should you use?
Use gross profit percent for anything about the health of the business — comparing yourself to your trade, checking the overheads are covered, or setting the floor below which a job is not worth taking. It is the number an accountant, a bank and any buyer of the business will use, so it is the one worth knowing by heart.
Markup is a pricing shortcut, useful at the counter when you are working off a supplier invoice. Just never quote one and mean the other: a supplier offering 50% markup is offering you a 33.3% margin, and the difference is the wage bill.