Should margin calculations include VAT?

For a VAT-registered business, calculate margin on net (VAT-exclusive) prices because VAT is collected on behalf of tax authority and not retained as revenue. Non-registered businesses include VAT in their cost of goods but not as a separate charge. Misstating this is a common source of overstated margins.

Why is my margin falling even though revenue is growing?

Common causes: input cost inflation not passed on, discounting to drive volume, product mix shifting to lower-margin lines, or rising overheads being absorbed. Track contribution margin by product and review at least quarterly. Rising revenue without margin discipline often hides declining profitability.

Profit Margin Calculator South Africa

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When to use this calculator

Before pricing a job, setting margin targets or reviewing hiring costs.
When you want to test sensitivity around volume, tax, markup or overheads.
When you need a practical estimate before committing to a budget or proposal.
When you are modelling break-even volume as costs or prices change.

A worked example

These are the example figures the calculator opens with.

A worked example
Input	Value
Revenue (R)	R50 000
Total Costs (R)	R35 000

For those figures the calculator returns:

Profit: R15 000,00
Margin: 30.00%
Markup: 42.86%

Method & assumptions

This calculator works on the standard gross profit margin formula: (Revenue − Cost of Goods Sold) ÷ Revenue × 100. Enter your sales revenue and the direct costs associated with producing or delivering your product or service. Direct costs typically include raw materials, stock purchased for resale, and any labour directly tied to production. The calculator does not factor in overheads such as rent, insurance, or administrative salaries — those belong in a net profit calculation.

UK businesses should enter VAT-exclusive figures if VAT-registered. Sole traders and limited companies may have different allowable cost definitions under tax authority rules, so consult your accountant when classifying costs for tax purposes. Use this tool for quick decision-making and pricing reviews rather than as a substitute for formal management accounts.

Common mistakes

Using an assumption that is not supported by a current local quote, bill, statement or official source.
Treating a generic estimate as a lender, provider, payroll or tax authority decision.
Mixing monthly and annual inputs without converting them consistently.
Testing only one scenario instead of checking how a cautious assumption changes the result.

What to do next

Run a second scenario with a cautious assumption so you can see the downside clearly.
Compare the result with the related calculators below before making a decision.
Check current local rules, eligibility and provider terms before applying or committing money.
Keep a record of the assumptions so you can update the estimate when a quote, bill or pay figure changes.

Questions people ask

Gross margin = (revenue - cost of goods sold) / revenue - it shows product profitability. Operating margin deducts overheads and operating expenses too. Net margin deducts interest, tax, and everything else, giving the final bottom-line margin. A healthy small business typically targets 50%+ gross, 15-20% operating, and 10%+ net depending on sector.