The profit margin on a sale represents the percentage of the retail price that stays with the company as profit after accounting for the cost of the item. As a business, you may have specific profit margins that you want to maintain. If you know the specific profit margin you want, you can calculate the retail price based on the cost you pay for the item. This ensures that when you set your prices, you meet your profit margin targets.
Divide the desired profit margin percentage by 100 to convert to a decimal. For example, if you want a 35 percent profit margin on your sale of cereal, divide 35 by 100 to get 0.35.
Subtract the result from 1. In this example, subtract 0.35 from 1 to get 0.65.
Divide the cost of the item by the result to find the retail price at the specific profit margin you want. In this example, if a box of cereal costs $1.15, divide $1.15 by 0.65 to find the retail price equals $1.77 at a specific profit margin of 35 percent.
