Markup vs Margin: Formula and Examples
Markup and margin are related, but they are not the same. Here is the simple way to calculate both and avoid pricing mistakes.
Markup vs margin in one sentence
Markup is based on cost. Margin is based on selling price.
That is why the two percentages are never interchangeable, even when they describe the same product.
The formulas
Use these two formulas:
- Markup % = (selling price - cost) / cost * 100
- Margin % = (selling price - cost) / selling price * 100
The numerator is the same in both cases. The denominator is different.
Example 1
A product costs 50 and sells for 75.
- Profit = 75 - 50 = 25
- Markup = 25 / 50 * 100 = 50%
- Margin = 25 / 75 * 100 = 33.33%
Same profit, different percentage.
Example 2
A service costs 120 to deliver and you charge 180.
- Profit = 60
- Markup = 60 / 120 * 100 = 50%
- Margin = 60 / 180 * 100 = 33.33%
This is why people often overestimate profit when they confuse markup with margin.
Quick conversion formulas
If you already know one percentage, you can convert it:
- Margin = Markup / (100 + Markup) * 100
- Markup = Margin / (100 - Margin) * 100
Conversion example
If markup is 40%, then margin is:
40 / 140 * 100 = 28.57%
If margin is 40%, then markup is:
40 / 60 * 100 = 66.67%
When to use each one
- Use markup when pricing from cost upward.
- Use margin when tracking profitability as part of revenue.
- Use both carefully in spreadsheets, quotes, and sales reports.
Common mistake
If you want a 30% margin, you cannot just add 30% to cost. That would give you a 30% markup, not a 30% margin.
To hit a target margin, work backward from the selling price formula or use a percentage calculator.
FAQ
Is markup always higher than margin?
Yes, for the same cost and selling price, markup is always higher than margin because cost is smaller than selling price.
Why do businesses track margin?
Because margin shows how much of revenue is kept as gross profit. It is more useful for comparing performance across products or periods.
Can I calculate markup or margin with a percentage tool?
Yes. You can use calculate-percentage.online to work out the percentage once you know the profit, cost, and selling price.