Margin vs Markup Calculator
Profit margin and markup from cost and selling price.
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Margin and markup describe the same profit two different ways, and confusing them is one of the most expensive pricing mistakes a small business can make. A 50% markup is not a 50% margin — mixing them up quietly erodes profit on every sale.
How it works
Margin = profit ÷ price; markup = profit ÷ cost. A $20 profit on an $80 cost is 25% markup but 20% margin.
Markup answers "how much did I add on top of my cost?" while margin answers "what slice of the selling price did I keep?" Because markup divides by the smaller number (cost) and margin divides by the larger number (price), markup is always the larger percentage for the same profit.
Suppliers and trade catalogs usually quote markup; accountants and investors talk in margin. Knowing how to convert between them keeps you from setting a price that looks healthy as a markup but is thin as a margin.
Margin % = (Selling price − Cost) ÷ Selling price × 100, and Markup % = (Selling price − Cost) ÷ Cost × 100.
Worked examples
An item costs $80 and you sell it for $100. → 20.0% margin, 25.0% markup, $20 profit.
Profit is $20. Divided by the $100 price that is a 20% margin; divided by the $80 cost it is a 25% markup — same dollars, two percentages.
You buy at $40 and want a clean 50% margin. → Sell at $80 — a 100% markup.
A 50% margin means cost is half the price, so price = cost ÷ (1 − 0.50) = $80, which is a $40 profit on a $40 cost, or 100% markup.
Tips & gotchas
- To convert a target margin to the markup you tell a supplier: markup = margin ÷ (1 − margin). A 40% margin is a 66.7% markup.
- Never apply your cost markup as if it were a margin — selling a $50 item at "30% margin" by adding 30% gives only a 23% margin.
- Higher-margin lines can carry slower turnover; pair this with sales volume before deciding a price is "good enough."
- Build a target margin into your price first, then sanity-check the resulting markup against what your category usually bears.
FAQ
Can margin ever be higher than markup?
No. For the same profit, markup divides by the smaller number (cost), so markup is always greater than or equal to the margin. They are only equal at zero profit.
Which one should I price with?
Price to a target margin, because margin is what actually lands on your income statement. Use markup only to communicate with suppliers who quote that way.
What is a good margin for a small business?
It varies widely by industry — retail often runs 20–50%, services higher, commodity resale much lower. Compare against peers in your specific category rather than a universal number.
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