Markup vs margin
Markup and margin both describe profit on a sale, but they use different bases. Markup compares profit with cost; margin compares profit with the selling price. Mixing them up is one of the most common pricing mistakes.
The formulas
Markup % = (Price − Cost) ÷ CostPrice = Cost × (1 + Markup %)
Margin % = (Price − Cost) ÷ PricePrice = Cost ÷ (1 − Margin %)
Worked example
An item costs $80 and sells for $100. Profit is $20. Markup = $20 ÷ $80 = 25%. Margin = $20 ÷ $100 = 20%.
Frequently asked questions
What is the difference between markup and margin?
Markup is profit as a percentage of cost. Margin is profit as a percentage of the selling price. The same sale always has a higher markup than margin.
How do I convert markup to margin?
Margin = Markup ÷ (1 + Markup). A 25% markup is 0.25 ÷ 1.25 = 20% margin.
How do I convert margin to markup?
Markup = Margin ÷ (1 − Margin). A 20% margin is 0.20 ÷ 0.80 = 25% markup.