The formulas
- Profit per unit = selling price − cost
- Gross margin % = profit ÷ selling price × 100
- Markup % = profit ÷ cost × 100
- Break-even units = fixed costs ÷ profit per unit, rounded up
Example: cost 8.00, price 20.00. Profit is 12.00, margin 60%, markup 150%. With 1,200 of fixed costs, break-even is 100 units.
What to count as fixed costs
Costs you pay once regardless of how many units sell: sampling, pattern development, photography, design fees and launch marketing. Costs that rise with each sale, such as payment fees and postage, belong in the unit cost.
Common questions
What is a good profit margin for clothing?
It depends on the channel and price point. Compare your result with the wholesale and retail margins your market expects, and make sure fixed costs are covered at realistic sales volumes.
Why is my break-even so high?
Either fixed costs are large for the size of the run or profit per unit is small. Raise the price, lower the unit cost or spread fixed costs over more styles.