Margin and gross profit: knowing which product actually earns
Margin and gross profit aren’t the same, and mixing them hides your real earnings. We explain the difference with an example and how to let the price list do the math.
Ask a merchant how much they earn on an item and you often get „well, there’s some margin". But margin and gross profit aren’t the same, and that’s exactly where it hides whether the business runs or leaks. Once you separate the two, you see for the first time which product feeds you and which just takes up shelf space.
What margin is, and what gross profit is
Margin is the percentage you add to the cost price, while gross profit is that earning expressed in money. Example: you buy for 100, add 40% margin, sell for 140 — your gross profit is 40 dinars per unit. The percentage tells you the pricing policy; the money tells you what actually stays in the till.
Why the difference matters
A high margin percentage on a cheap item can bring a tiny gross profit, while a lower margin on a pricier item brings more money. If you look only at the percentage, the feeling fools you; if you look only at the money, you miss the room for a discount. Only the two together give the real picture — and help you set a price that makes sense.
How to stop calculating by hand
Working out margin and gross profit in Excel next to the till is slow and error-prone, especially when you change prices on dozens of items. Magaza has a price list that calculates margin, gross profit and bulk price changes itself, so you instantly see how much you really earn — before you confirm the price.
Key takeaways
- Margin = percentage on cost; gross profit = that earning in money
- A high percentage doesn’t always mean more money — watch both
- A price list that computes margin and profit saves time and prevents mistakes
Frequently asked questions
Not necessarily. What matters is how much money (gross profit) stays and how many units sell. A small profit times a large quantity can beat the opposite.
Through a bulk price change in the price list — you set a rule (e.g. +5%) and the system recalculates the whole group, with the new margin and gross profit.
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