How to calculate profit margin for a product in Pakistan

This is the arithmetic: how to work out the margin on a product you already sell, with every cost a cash on delivery order carries. If you are setting a price from scratch, read how to price products in Pakistan first; it covers market checks and when to raise prices. All rupee figures below are a made-up example. Use your own.

The profit margin formula

Profit margin % = profit ÷ selling price × 100

Profit is the selling price minus what the sale cost you. Example:

• Selling price: Rs 1,200
• Cost: Rs 800
• Profit: 1,200 − 800 = Rs 400
• Margin: 400 ÷ 1,200 × 100 = 33.3%

Read it as: out of every Rs 100 the buyer pays, Rs 33.30 is yours. The other Rs 66.70 went on costs. The hard part is not the division. It is putting the right number in “cost”, which is most of this post.

Margin vs markup

Both use the same profit. They divide it by different things.

• Margin = profit ÷ selling price
• Markup = profit ÷ cost

The Rs 1,200 product above has a 33.3% margin and a 400 ÷ 800 = 50% markup. Same Rs 400, two percentages. The mix-up happens when a seller adds 30% to cost and calls it a 30% margin. Rs 800 plus 30% is Rs 1,040, a profit of Rs 240, and 240 ÷ 1,040 is a 23% margin.

To convert one into the other:

• Margin = markup ÷ (1 + markup). A 50% markup is 0.5 ÷ 1.5 = 33.3% margin.
• Markup = margin ÷ (1 − margin). A 25% margin is 0.25 ÷ 0.75 = 33.3% markup.

Use margin when you talk about profit. The courier’s tax, a discount and a marketplace commission are all taken as a share of the selling price, so margin is the number that lines up with them. The profit margin calculator converts between the two and gives the price for a target margin.

Gross margin and margin per order

There are three margins worth knowing, each taking off more costs than the last:

• Gross margin on the product. Price minus what you paid the supplier. It tells you whether the product is worth stocking at all.
• Margin per delivered order. Price minus the product, packing, courier, refused parcels, ads and the tax the courier withholds. This is what one sale actually leaves you, and the number to set prices and offers with.
• Net margin for the business. The month’s profit after rent, salaries and other fixed costs, divided by the month’s sales. You cover fixed costs with the number of orders, not by loading them onto one product.

A product can have a 50% gross margin and a much thinner margin per delivered order. The example below shows how.

What goes into the cost of one order

• Product cost. What the piece cost to get into your hands: supplier rate plus your share of the cargo to bring stock to you.
• Packing. Flyer, box, tape, slip. It goes on every parcel you send.
• Courier charge. The delivery fee you pay the courier per parcel, plus any COD fee or fuel surcharge on its rate card. The courier charges calculator works it out from weight and box size.
• Refused parcels. A refused parcel costs you the packing, the courier charge and any return fee, and earns nothing. Spread those costs over the parcels that were delivered. The piece itself comes back, so count its cost only if it comes back damaged or you cannot sell it again.
• Ads per delivered order. The month’s ad spend divided by delivered orders, not by orders received.
• Income tax the courier withholds. On cash on delivery, the courier deducts tax from the gross amount it collects before it pays you. FBR’s withholding rate card for tax year 2027 sets it at 2% if you are on the Active Taxpayers List and 4% if you are not, as of October 2026. What it means for you is in online business tax in Pakistan, and where it shows on your payout is in the COD payment cycle.

The selling price in the formula is what the buyer pays at the door. If you charge delivery on top, add that fee to the price, because it is money in, and the courier withholds tax on the whole amount it collected. How to set that fee is in delivery charges for an online store.

A worked example in rupees

Example, invented numbers. A product sold for Rs 3,000 with free delivery. 100 orders come in during the month and all are dispatched.

• Product cost Rs 1,500, packing Rs 50, courier charge Rs 250 per parcel.
• 15 parcels are refused, so 85 are delivered. The courier charges Rs 150 per return.
• Ad spend for the month: Rs 25,500.
• The seller is on the Active Taxpayers List, so the courier withholds 2%.

For the whole month:

• Profit per delivered order: 64,650 ÷ 85 = Rs 761
• Margin per delivered order: 64,650 ÷ 255,000 = 25.4%
• Gross margin on the product: (3,000 − 1,500) ÷ 3,000 = 50%

Half the price looked like profit. A quarter of it was. Per delivered order the costs are Rs 1,500 product, Rs 59 packing, Rs 294 courier, Rs 26 return fees, Rs 300 ads and Rs 60 tax, Rs 2,239 in all.

Two lines move the most. Not on the Active Taxpayers List, the tax doubles to Rs 120 an order and the margin falls to 23.4%. If 25 parcels were refused instead of 15, packing, courier and ads would be spread over 75 delivered orders and the profit per order would drop to about Rs 650. To try your own return rate, use the COD profit calculator, and see how to reduce COD returns if that line is high.

Check the margin before a sale or free delivery

A discount comes straight out of profit. Every rupee off the price is a rupee less profit, minus the tax you no longer pay on it. Costs do not fall with the price.

Same example, 20% off. The price drops by Rs 600 to Rs 2,400. Tax on Rs 600 at 2% is Rs 12, so profit per delivered order falls by Rs 588, from Rs 761 to Rs 173. The margin goes from 25.4% to about 7%. To make the same Rs 64,650 in the month, the seller needs about 375 delivered orders instead of 85, with ads costing the same per order.

Free delivery. Say you charged Rs 250 delivery on top and now drop it. The buyer pays Rs 250 less, the tax falls by Rs 5, and your profit per order falls by Rs 245. The courier still bills you the same.

Before you announce any offer:

• Decide the lowest profit per delivered order you will accept.
• Work out the profit after the offer, with the same return rate and ad cost.
• If it falls below your floor, change the offer: a smaller discount, a minimum order for free delivery, or a bundle where one courier charge covers two pieces.

The discount calculator shows your profit before and after, and how many more orders a discount needs to earn the same.

A spreadsheet you can copy

One row per product, inputs on the left, results on the right. Type the headings in row 1 and the formulas in row 2, then drag them down. It works the same in Excel and Google Sheets. Enter percentages as percentages (15%, not 15).

Column J is the refused-parcel line. Each delivered order carries its own packing and courier plus a share of the refused ones, which is what dividing by (1 − refused %) does. With the example numbers it gives Rs 379, and the sheet returns Rs 761 profit and a 25.4% margin, the same as the month above.

Take the refused % from your courier’s statements for the last month or two, and the ad figure from last month’s spend divided by last month’s delivered orders. Update both every month. Format N and O as percentages.

Mistakes that inflate the margin

• Dividing by cost. That is markup. It always reads higher than margin.
• Counting orders received. Ads and refused parcels have to be divided by delivered orders, because only those bring in money.
• Leaving out the tax. The courier keeps it before you see the money, so it never shows up as a bill you pay.
• An old courier rate. Recheck the courier and return charges whenever your courier sends a new rate card.
• One margin for the whole store. A light product and a heavy one pay different courier charges, and one may come back more than the other. Work it out per product.

Questions sellers ask

How do you calculate profit margin for a product?

Take the selling price, subtract everything the sale cost you, and divide the result by the selling price. Multiply by 100 for a percentage. A product that sells for Rs 1,200 and costs Rs 800 has Rs 400 profit and a margin of 400 ÷ 1,200 × 100 = 33.3%.

What is the formula for profit margin percentage?

Profit margin % = (selling price − cost) ÷ selling price × 100. Markup uses the same profit but divides by cost instead: markup % = (selling price − cost) ÷ cost × 100.

How do I calculate profit margin in Excel or Google Sheets?

Put the selling price in B2 and the cost in C2. In D2 type =(B2-C2)/B2 and format the cell as a percentage. For markup, use =(B2-C2)/C2. The formulas are the same in Excel and Google Sheets.

What is the difference between gross and net profit margin for a product?

Gross margin counts only what you paid for the product. Net margin also takes off packing, courier, refused parcels, ads, the tax the courier withholds and, for the whole business, your monthly fixed costs. On cash on delivery the gap between the two can be large, so price from the net figure.

Can profit margin be more than 100%?

No. Margin is profit as a share of the selling price, and profit can never be bigger than the price. Markup can go above 100%: a product bought for Rs 500 and sold for Rs 1,500 has a 200% markup and a 66.7% margin.

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