Markup vs. Margin: What’s the Difference?
Margin is profit as a share of the price; markup is profit as a share of the cost. See both formulas, a conversion table, and how to price for a target margin.
The short version
- Margin = profit ÷ selling price. Markup = profit ÷ cost.
- The same sale always has a higher markup than margin: a 50% markup is a 33.3% margin.
- To hit a target margin, divide cost by (1 − margin): $60 ÷ (1 − 0.40) = $100.
- Adding a 40% markup to a $60 cost gives $84 — only a 28.6% margin.
- Margin can never reach 100%; markup has no ceiling.
Margin and markup both describe the profit on a sale, and both are percentages — which is exactly why they get confused. They divide the same profit by different numbers, so the same sale produces two very different-looking percentages. Price with the wrong one and you can earn far less than you planned.
The two formulas
- Profit = selling price − cost
- Margin = profit ÷ selling price × 100
- Markup = profit ÷ cost × 100
Say you buy a product for $60 and sell it for $100. Profit is $40. Your margin is $40 ÷ $100 = 40%, and your markup is $40 ÷ $60 = 66.7%. Same sale, same $40 — two different percentages.
An easy way to remember it
Margin looks at the sale from the price down (what share of each sale is profit). Markup looks at it from the cost up (how much you added to what you paid).
Markup to margin conversion table
| Margin | Equivalent markup |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
The gap widens as margins rise. A 50% margin means you doubled your cost — a 100% markup. That’s why a “keystone” retail price (double the wholesale cost) is described as a 100% markup but a 50% margin.
How to price for a target margin
If you know the margin you need, don’t add that percentage to your cost — divide instead. Price = cost ÷ (1 − target margin). For a 40% margin on a $60 item, that’s $60 ÷ 0.60 = $100.
The most common pricing mistake
Adding 40% to a $60 cost gives $84, not $100. That’s a 40% markup — and only a 28.6% margin. If your costs and overhead were planned around a 40% margin, you’d come up short on every sale.
Which one should you use?
Use margin when you’re looking at profitability — it’s what financial statements and most business comparisons report, and it tells you how much of each sales dollar you keep. Use markup when you’re setting prices from a known cost, since it’s the multiplier you apply. Just be clear which one a supplier, partner, or spreadsheet means before acting on the number.
Run your own numbers
Enter a cost and selling price to see both percentages at once, or enter a target margin or markup to get the price to charge.
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Frequently Asked Questions
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $100 cost gives a $150 price and a $50 profit — a 33.3% margin. A 50% margin requires a 100% markup: a $100 cost sold for $200.
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 30% margin is 0.30 ÷ 0.70 = 42.9% markup.
Can margin be more than 100%?
No. Margin is profit as a share of the price, and profit can never exceed the price. Markup can be any size — a $10 item sold for $50 has a 400% markup but an 80% margin.
This article is for general education and is not financial, tax, or legal advice. Figures reflect published IRS and SSA amounts as of the date above; verify current limits with the linked sources or a qualified professional before acting.
About the author
David Miles is the founder of FigureMoney and builds independent, source-backed personal-finance tools across the Modern Site Builders network. Every calculator and guide cites the IRS, SSA, or primary research behind its numbers.
Calculators in this guide
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