I buy from a supplier in US dollars and sell in dirhams; how do I calculate my margin correctly?
Convert the cost into dirhams first, at the rate your bank or card actually charged including any foreign transaction fee, then enter both cost and price in dirhams. The currency picker in the calculator only changes the label; it does not convert between currencies.
The mistake that gives a fantasy margin
Your supplier invoices 20 dollars a unit. You sell it in your Dubai store for 119 dirhams. Type 20 as the cost and 119 as the price and the calculator shows a margin of 83.19% and a markup of 495%. The calculator is not wrong; it subtracts one number from another. The mistake is that the two numbers are in different currencies.
Choosing AED or USD from the currency list will not fix it, because that list is display-only and just puts a code beside the results. You can even pick no currency; the maths stays the same.
Which exchange rate to use
Not the rate a search engine shows you. Use what it actually cost you: open the card or transfer statement and divide the dirham amount debited by the dollar amount. That figure includes the bank's spread and the foreign transaction fee, which are real costs to you.
At an assumed rate of 3.673: the unit costs 73.46 dirhams. At a price of 119: profit 45.54, margin 38.27%.
At the real rate from your card statement, say 3.775 after fees: the cost is 75.50. Profit 43.50, margin 36.55%.
Fees and the rate gap took 2.04 dirhams off each unit and about 1.7 points of margin. Small on one order, but across hundreds of units it is money worth knowing about.
Test the next order before you pay
Supplier prices change, and so can your card's charges. If the supplier asks 22 dollars on the next order, at the same real rate the cost becomes 83.05 dirhams. Enter it with the price of 119: profit 35.95, margin 30.21%. Now you know before paying that your margin will drop by about 6 points if you keep the price, so you can negotiate or reprice with your eyes open.
What else needs converting
- Supplier shipping billed in dollars: convert it the same way and spread it across the units.
- Fixed fees per transfer: divide them by the number of units in the order.
- Local costs in dirhams, such as packaging: add them as they are, after the conversion.
To track spending in several currencies without mixing them, log it in the Expense summary generator, which totals each currency separately. Then work out the final margin in the Profit margin calculator once every figure is in your selling currency.
Common questions
Why doesn't the calculator convert currencies itself?
Because the rate that matters is the one you actually paid, fees included, and only your statement knows it.
Should I recalculate with every order?
Yes, whenever the supplier price or your real exchange rate changes. An old cost gives you an old margin.