Business
Reverse Margin Calculator
Start from cost and the margin you want to keep, then see the price you must charge.
Price from a target margin
Reverse margin is the usual way to set list prices when you know what you can pay for stock and what percentage you must keep. If cost is £50 and you need 40% margin, price is cost ÷ (1 − 0.40) = £83.33 — not cost plus 40%. Mixing margin with markup is a common way to undercharge. This calculator sets selling price from cost and target margin in one step. If you also pay a percentage selling fee, increase the target margin or fold the fee into cost. See markup vs margin and gross margin for the forward checks. Planning arithmetic only — not pricing or legal advice. Psychological endings (£19.99, £49) come after the margin maths — round in a direction that still protects the target when fees apply. For wholesale-to-retail chains, set your exit wholesale price first, then let the retailer apply their own margin rather than reverse-engineering their shelf price blindly.
Worked example
Wholesale cost £24, target margin 45%: price = 24 ÷ (1 − 0.45) = £43.64. At that price, profit is £19.64. A 12% marketplace fee on £43.64 (£5.24) cuts kept margin to about 33% unless you raise the target or treat the fee as part of cost.
Limits and assumptions
Does not replace cash-flow planning or competitor research. Psychological price endings (£39.99) are your choice after the maths. VAT-inclusive shelves need a clear policy on whether cost and price are ex-VAT or inc-VAT. Competitor clustering and MAP policies can prevent you from posting the pure margin-derived price.
Frequently asked questions
What is reverse margin pricing?
Working backwards from a required margin percentage to the selling price that delivers it on a known cost.
Why is price not cost plus the margin percentage?
Margin is profit divided by selling price. Markup is profit divided by cost. They need different formulas.
How do selling fees change the target?
Either raise the margin target to leave room for fees, or add expected fees into the cost field.
Can I use this for services?
Yes if you treat delivery cost (time, subcontractors) as the cost basis and pick a margin target.
What if I know desired markup instead?
Use markup vs margin to convert, or price as cost × (1 + markup).