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Free profit margin calculator

Calculate the real margin on your products or services in seconds. No signup. VAT included.

Results
Gross profit
$55.17
Profit margin
35.56%
Markup
55.17%
Breakdown
Product cost
$100.00
Price before VAT
$155.17
VAT (16%)
$24.83
Net profit
$55.17
Final price to customer
$180.00

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What is a profit margin?

Profit margin is the percentage of your selling price (before VAT) that stays as profit after subtracting the product cost. If you sell something for $100 that cost you $60, your profit is $40 and your margin is 40% — that $40 is 40% of the selling price. It's the single most important metric to know whether a product actually makes money or just moves inventory.

Margin vs. Markup: what's the difference?

They're two different ways to express the same profit, and confusing them is one of the costliest mistakes in Mexican retail. Margin divides profit by the selling price. Markup divides profit by the cost.

Concrete example
  • Product cost: $100
  • Selling price (no VAT): $150
  • Profit: $50
  • Margin = 50 / 150 = 33.3%
  • Markup = 50 / 100 = 50%

Same product, same profit, two very different numbers. Suppliers usually talk markup because it sounds bigger; accountants and serious managers work in margin because it matches the income statement.

How to calculate margin in 3 steps

1. Strip VAT from the price

If you sell for $116 with VAT, your net price is $100 (divide by 1.16). VAT isn't yours — it belongs to the tax authority. Never calculate margin on a VAT-inclusive price: it inflates the number and lies to you.

2. Subtract the real product cost

Include purchase cost plus shipping, shrinkage, and any direct expense. If you buy at $60 but pay $5 per-unit shipping, your real cost is $65.

3. Divide profit by the net price

If net price is $100 and real cost is $65, profit is $35. Margin = 35 / 100 = 35%. That's the number you compare to your industry benchmark.

What's a healthy margin by industry in Mexico?

Typical ranges on selling price excluding VAT. Use them as a benchmark — your actual margin depends on location, volume, and cost structure.

IndustryTypical margin
Grocery / corner store20% – 30%
Restaurants60% – 70%
Hardware stores25% – 35%
Pharmacies30% – 40%
Salons & beauty70% – 80%
Stationery stores30% – 45%
Auto repair shops40% – 60%
Gyms60% – 75%
Clothing boutiques50% – 60%
GENESIS BUSINESS

Genesis Business calculates margins for every product, automatically

This calculator is free and perfect for analyzing one product at a time. If you have hundreds or thousands of SKUs, Genesis Business loads them all, uses the purchase cost from each inventory entry, and shows in real time which products are selling at low margin, which are getting over-discounted, and where you're losing money without knowing it.

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Frequently asked questions

Is margin calculated before or after VAT?
Always before VAT. VAT is not your revenue — it's a tax you collect from the customer and remit to the tax authority. If you calculate margin on a VAT-inclusive price, your real margin is about 16% lower than what you see. Our calculator lets you enter prices with or without VAT and converts automatically.
What's a good profit margin in Mexico?
It depends on the industry. 20% in groceries is excellent because volume is huge. 20% in a salon is not enough. Check the table above to compare with your specific industry. As a rough rule, if your gross margin in brick-and-mortar retail is under 25%, you're likely not covering rent, payroll, and electricity.
Are margin and profit the same?
Not exactly. Margin is a percentage; profit is the peso amount. And there are several types: gross profit (price minus product cost) is what this tool calculates. Net profit also subtracts operating expenses, salaries, rent, and taxes — usually much smaller than gross.
Why does my supplier talk in markup, not margin?
Because markup is always a bigger number than margin and sounds better in sales. A 100% markup (doubling the cost) is only a 50% margin. Always convert markup to margin when analyzing profitability: margin = markup / (1 + markup).
Can I use this calculator for services?
Yes. Use as cost the sum of materials, your team's time valued hourly, and any direct input. The math is identical. Service margins are usually higher (60–80%), but you also have more fixed costs to cover.