Margin vs. markup, explained
Margin and markup both describe the profit on a sale, but they measure it against different starting points. Margin expresses profit as a share of the selling price, while markup expresses the same profit as a share of the cost. Because the price is always larger than the cost, a given dollar profit always works out to a higher markup percentage than margin percentage.
The dollar profit is identical either way: profit = price − cost. From there, margin % = (price − cost) ÷ price × 100, and markup % = (price − cost) ÷ cost × 100. Confusing the two is a common pricing mistake — applying a 50% markup when you meant a 50% margin leaves money on the table.
Markup-to-margin conversion table
The two figures are linked: margin = markup ÷ (1 + markup). Here is how common markups translate into margins.
| Markup | Margin |
|---|---|
| 25% | 20.0% |
| 33.3% | 25.0% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
| 150% | 60.0% |
Reference note: a margin cannot reach 100% — that would require zero cost — so the "Find the price" tool treats a target margin of 100% or more as undefined.
Frequently asked questions
- What is the difference between margin and markup?
- Both measure profit, but against different bases. Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. For the same dollar profit, the markup percentage is always higher than the margin percentage.
- How do I calculate profit margin?
- Subtract cost from price to get the profit, then divide by the price and multiply by 100: margin % = (price − cost) ÷ price × 100. A $60 item costing $40 has a 33.3% margin.
- How do I calculate markup?
- Subtract cost from price to get the profit, then divide by the cost and multiply by 100: markup % = (price − cost) ÷ cost × 100. A $60 item costing $40 has a 50% markup.
- How do I price a product for a 50% margin?
- Divide the cost by one minus the margin as a decimal: price = cost ÷ (1 − 0.50). An item costing $40 sells for $80 — not $60, which would be a 50% markup.
- What is a good profit margin?
- It depends heavily on the industry. Retail and groceries often run thin single-digit margins, while software can exceed 50%. Compare against norms for your sector — this is informational, not financial advice.
- How do I convert markup to margin?
- Use margin = markup ÷ (1 + markup) in decimals. A 50% markup is 0.50 ÷ 1.50 = 33.3% margin. Reverse it with markup = margin ÷ (1 − margin).