Use the right denominator
If a product costs NGN 1,000 and sells for NGN 1,300, profit is NGN 300. Markup is 300 divided by 1,000, or 30%. Margin is 300 divided by 1,300, or about 23.1%.
Calculate a target margin
Divide cost by one minus the target margin expressed as a decimal. At a 30% margin, NGN 1,000 divided by 0.70 gives approximately NGN 1,428.57 before any applicable tax.
Include what the work consumes
Direct materials are not the whole cost of a service or product. Consider delivery time, payment delays, waste, revisions and overhead. The pricing and margin calculator makes those assumptions visible.
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