Key takeaways
Markup is profit over cost. Margin is profit over price. Same profit, two percentages, and mixing them up quietly erodes pricing.
- Markup = profit ÷ cost. Margin = profit ÷ selling price.
- Margin is always smaller than markup for the same profit.
- Convert with margin = markup ÷ (1 + markup).
Two ways to express the same profit
A product costs $40 and sells for $60. Profit is $20.
- Markup = 20 ÷ 40 = 50 %.
- Margin = 20 ÷ 60 = 33.3 %.
Converting
| Markup | Margin |
|---|---|
| 25 % | 20 % |
| 50 % | 33 % |
| 100 % | 50 % |
| 300 % | 75 % |
Margin = markup ÷ (1 + markup). Markup = margin ÷ (1 − margin).
Which one to use
Pricing conversations use markup; financial statements use margin. If a target "40 %" arrives without a label, ask which one before you set a price.
Related questions
- What markup gives a 40 % margin?
- Is margin the same as profit percentage?
