Here is a quick test. You buy a shirt from a wholesaler in Nairobi for KSh 500. You sell it for KSh 1,000. What is your profit margin?

If you said 50 percent, you are wrong. And you are not alone. Most Kenyan sellers make the same mistake, and it is costing them real money.

The difference between markup and margin is a simple math concept. But getting it wrong means you think you are making more than you actually are. And that is dangerous for any business.

What is the difference between markup and margin?

Markup is what you add to the cost to get your selling price. Margin is the percentage of the selling price that is profit.

When you buy at KSh 500 and sell at KSh 1,000:

• Your markup is 100 percent (you added 100% of the cost)
• Your margin is 50 percent (half the selling price is profit)

They are not the same thing. And confusing them means you are likely pricing your products wrong.

Why does this matter for your duka?

Imagine you want a 50 percent profit margin on that KSh 500 shirt. If you think markup and margin are the same, you might add 50 percent of KSh 500 and sell it at KSh 750. But at that price, your actual margin is only 33 percent — meaning each sale leaves you with KSh 250, not KSh 375 as you intended.

Over a month of selling 200 shirts, that difference adds up to KSh 25,000 in lost profit. Money you planned for, counted on, and did not get.

The simple formula every seller needs to know

If you want a specific profit margin, here is how to calculate your selling price correctly:

Desired Selling Price = Cost ÷ (1 - Desired Margin)

So if you want a 50 percent margin on a KSh 500 product:

KSh 500 ÷ (1 - 0.50) = KSh 500 ÷ 0.50 = KSh 1,000

Here is a cheat sheet for common margins:

• 30% margin → Price = Cost ÷ 0.70 (e.g., KSh 500 item sells at KSh 714)
• 40% margin → Price = Cost ÷ 0.60 (e.g., KSh 500 item sells at KSh 833)
• 50% margin → Price = Cost ÷ 0.50 (e.g., KSh 500 item sells at KSh 1,000)
• 60% margin → Price = Cost ÷ 0.40 (e.g., KSh 500 item sells at KSh 1,250)

The hidden costs most sellers forget

Your cost is not just what you paid the wholesaler. Many Kenyan sellers calculate margin using only the purchase price. But your real cost includes:

• Transport to bring stock to your shop or location
• M-Pesa transaction fees when customers pay digitally
• Packaging — even if it is just a plastic bag
• Your time spent buying, sorting, and selling
• Shop rent divided across your inventory
• Phone data for WhatsApp orders and communication

A customer from Eastleigh once told me he thought he was making a 40 percent margin. After adding transport, M-Pesa fees, and the KSh 2,000 monthly WhatsApp data, his real margin was 22 percent. He had been running his business on numbers that did not exist.

How to fix your pricing today

Grab a notebook or open Notes on your phone. For your top-selling products:

1. Write down the actual cost including transport and fees
2. Decide what margin you need (start with 40 percent minimum)
3. Apply the formula: Price = Cost ÷ (1 - Desired Margin)
4. Check what competitors are charging as a sanity check
5. Adjust if your price is too far above market — but do not drop below 25 percent margin

What about discounts and negotiations?

This is where margin math really hurts. If your normal margin is 40 percent and a customer asks for a 10 percent discount, your margin drops to 30 percent. If they ask for 20 percent off, you are at 20 percent. That sale is barely worth your time.

Price your products so that even after your typical discount, you still make at least 20 percent margin. That way you can negotiate without losing money.

The bottom line

Margin is not markup. The difference is simple math, but getting it wrong costs you thousands of shillings every month. Take 30 minutes this week to recalculate your actual margins. It might be the most profitable half hour you spend this year.