The core formula
For positive cost and price, margin = markup ÷ (1 + markup) using decimal markup. A 50% markup therefore corresponds to a 33.33% margin, not 50%.
Worked example
A $50 cost sold for $70 has 40% markup but about 28.57% margin.
How markup and margin differ
Both metrics use the same profit amount but divide by different bases. Markup divides profit by cost, while margin divides profit by selling price or revenue.
Use decimal rates in the conversion formulas. A 40% markup is 0.40 ÷ 1.40 = 28.57% margin. A 40% margin requires 0.40 ÷ 0.60 = 66.67% markup.
Which metric should you use?
Markup is convenient when building a price from cost. Margin is convenient when measuring how much of revenue remains as profit under a selected cost definition.
Pricing errors often happen when a target margin is entered as if it were a markup. If cost is $60, a 40% markup gives a $84 price, but a 40% margin requires a $100 price.
Common mistakes
- Using the words markup and margin interchangeably.
- Applying a target margin directly to cost as if it were markup.
- Comparing percentages without checking which denominator was used.
Use the calculator
Find gross, operating or net margin from revenue and cost figures.
Open Profit Margin CalculatorConvert markup to margin without guessing
For positive cost and price, margin = markup ÷ (1 + markup) using decimal markup. A 50% markup therefore corresponds to a 33.33% margin, not 50%.
Why teams should name the metric
Buying teams often talk in markup while financial reports emphasize margin. Stating the denominator explicitly prevents pricing and performance disputes.
Frequently asked questions
Is 50% markup equal to 50% margin?
No. A 50% markup corresponds to a 33.33% margin.
What markup gives a 30% margin?
30% ÷ 70% = approximately 42.86% markup.
Why is markup higher than margin?
For a profitable sale, cost is smaller than revenue, so dividing the same profit by cost produces the larger percentage.
What should I verify about why teams should name the metric?
Buying teams often talk in markup while financial reports emphasize margin. Stating the denominator explicitly prevents pricing and performance disputes.