Markup and margin both describe how much you make on a sale, but they use different starting points. Mixing them up is one of the most common pricing mistakes in small businesses: you think you are earning 30%, and you are actually earning 23%.
Use the calculator below to get your selling price, profit, markup and margin from any two numbers. Then read on for the formulas, a worked example and a quick conversion table.
Markup & Margin Calculator
Markup vs. margin: the difference in one sentence
Markup is profit compared with your cost. Margin is profit compared with your selling price. Because the selling price is always larger than the cost (when you make a profit), your margin is always a smaller percentage than your markup on the same sale.
The formulas
- Profit = Selling price − Cost
- Markup % = Profit ÷ Cost × 100
- Margin % = Profit ÷ Selling price × 100
- Price from a markup = Cost × (1 + Markup %)
- Price from a margin = Cost ÷ (1 − Margin %)
- Markup → Margin: Margin = Markup ÷ (1 + Markup)
- Margin → Markup: Markup = Margin ÷ (1 − Margin)
Worked example
You buy a product for $40 and sell it for $60.
- Profit: $60 − $40 = $20
- Markup: $20 ÷ $40 = 50%
- Margin: $20 ÷ $60 = 33.3%
Same sale, same $20 profit, two very different percentages. Both are correct. They just answer different questions.
The pricing mistake this causes
Say your costs are $100 per job and you want a 30% margin. If you simply add 30% to your cost, you charge $130. Your profit is $30, but your margin is only $30 ÷ $130 = 23.1%.
To actually hit a 30% margin, divide instead of multiply: $100 ÷ (1 − 0.30) = $142.86. That gap of $12.86 per job adds up fast. On 500 jobs a year it is more than $6,400 you thought you were earning but never charged for.
Markup to margin conversion table
| Markup | Margin |
|---|---|
| 10% | 9.09% |
| 20% | 16.67% |
| 25% | 20.00% |
| 30% | 23.08% |
| 40% | 28.57% |
| 50% | 33.33% |
| 60% | 37.50% |
| 75% | 42.86% |
| 100% | 50.00% |
| 150% | 60.00% |
| 200% | 66.67% |
Notice that a 100% markup (doubling your cost) is only a 50% margin, and no markup can ever reach a 100% margin.
Which one should you use?
- Use markup when you set prices from your costs, such as quoting a job or pricing a product you buy wholesale.
- Use margin when you look at the health of the business, compare yourself with industry reports, or talk to a lender or accountant. Financial statements report margin, not markup.
- When someone gives you a percentage, ask which one they mean. Many arguments about pricing are really about this.
FAQ
Is a 50% markup the same as a 50% margin?
No. A 50% markup gives a 33.3% margin. A 50% margin needs a 100% markup.
Can margin be higher than 100%?
No. Margin is profit as a share of the selling price, and profit can never be larger than the price. Markup has no upper limit.
Does margin include overhead like rent and insurance?
The margin in this calculator is gross margin: price minus the direct cost of that sale. Your net margin, after overhead, will be lower. Price with enough gross margin to cover overhead and still leave a profit.
This calculator is for general estimates only and is not financial or tax advice. Check important pricing decisions with your accountant.