General information only — not financial or tax advice.
Markup and margin both describe your profit as a percent. They sound the same, but they are worked out in two different ways — so the same sale gives you two different numbers.
The one-sentence difference: Markup is your profit divided by what the item cost you. Margin is your profit divided by the selling price. Same profit dollars — two different percents, because the bottom number is different.
Markup
Profit ÷ Cost
Markup answers: “How much did I add on top of what I paid?” It starts from your cost.
Margin
Profit ÷ Selling price
Margin answers: “Out of each dollar I take in, how much do I keep as profit?” It starts from the selling price.
Because the selling price is bigger than the cost, the margin percent always comes out smaller than the markup percent for the same sale. Neither number is wrong. They are just measuring from two different starting points.
Say you buy an item for $80 and sell it for $100.
See what happened? The profit is the same $20 both times. Only the bottom number changed — $80 for markup, $100 for margin. That is the whole difference.
Use this table to change one number into the other. Find your margin on the left, and the matching markup is on the right — they describe the exact same profit.
| Margin | Markup |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
The math behind the table, if you ever need it:
Markup = Margin ÷ (1 − Margin)
Margin = Markup ÷ (1 + Markup)
In these formulas, use the percent as a decimal — so 20% is written as 0.20.
Say an item costs you $60, and you want a 40% margin on it.
The mistake: just “add 40%” to the cost. $60 + 40% = $84. That is a 40% markup — and the margin on an $84 price is only 28.6%, not 40%. You come up short without realizing it.
The right way: for a true 40% margin, divide the cost by what is left after the margin: $60 ÷ 0.60 = $100. Check it: profit is $100 − $60 = $40, and $40 ÷ $100 = 40% margin. ✓
Adding a percent on top of cost gives you a markup. If the number you want is a margin, use the divide method — or Calculator B below, which does it for you.
Three small calculators follow. Each one shows its steps, so you can see exactly how the answer was worked out. Type in any figures you like — made-up practice numbers work fine too.
Your numbers stay on this page. Nothing you type is sent anywhere or saved.
Type in what an item cost you and what you sold it for.
Type in the cost and the margin you are aiming for. This gives you the price that truly hits that margin.
Type in the cost and the markup you want to add on top. This also tells you what margin that price works out to.
Either one is fine, as long as you know which one you are looking at.
Margin is the share of the selling price you keep. If you think in terms of “out of every dollar that comes in, how much stays with me,” margin is your number.
Markup is how much you added on top of cost. If you think in terms of “I paid this much, so I will add this much on top,” markup is your number.
The one rule that matters: pick one way and use it the same way every time, so your numbers compare fairly from one item — and one month — to the next. Trouble starts when one price was set with markup and the next with margin, and nobody noticed the switch.
General information only — not financial or tax advice.