How to Calculate Specific Profit Margin

by Michael Keenan; Updated September 26, 2017

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.

Step 1

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.

Step 2

Subtract the result from 1. In this example, subtract 0.35 from 1 to get 0.65.

Step 3

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.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."