Markup vs Margin
Markup and margin both describe profit as a percentage, but they use different denominators: markup is based on cost, margin is based on selling price. This guide shows the formulas, a worked example, and how to convert between them so the two are never confused.
Last reviewed: 2026-08-19
The key difference
Markup is profit expressed as a percentage of cost — how much you add to the cost to reach the price. Margin is profit expressed as a percentage of the selling price — what fraction of the price you keep as profit. Both use the same profit figure, but because the denominators differ, the percentages are different for the same deal.
Markup formula
- Markup % = Profit ÷ Cost × 100
- Profit = Selling Price − Cost
Markup answers “how much did I add to the cost?” If you buy for $60 and sell for $100, the profit is $40 and the markup is $40 ÷ $60 = 66.67%.
Margin formula
- Profit Margin % = Profit ÷ Selling Price × 100
Margin answers “what fraction of the price is profit?” On the same $100 sale with a $60 cost, the margin is $40 ÷ $100 = 40%. The profit is identical; only the percentage differs. Calculate yours with the Profit Margin Calculator.
Worked example
Cost = $60, Selling Price = $100, Profit = $40.
- Markup = $40 ÷ $60 × 100 = 66.67%
- Margin = $40 ÷ $100 × 100 = 40%
| Figure | Value | Based on |
|---|---|---|
| Cost | $60.00 | — |
| Selling Price | $100.00 | — |
| Profit | $40.00 | Price − Cost |
| Markup | 66.67% | Cost |
| Margin | 40.00% | Selling Price |
Why the difference matters
Quoting a 40% markup when you mean a 40% margin sets the price too low. A 40% markup on a $60 cost gives a price of $84 and a margin of only 28.57%, not 40%. To actually keep 40% of the price as profit, the price must be $100 — a 66.67% markup. Confusing the two is a common pricing error that quietly erodes profit.
Converting between markup and margin
- Margin = Markup ÷ (1 + Markup)
- Markup = Margin ÷ (1 − Margin)
These come from the fact that price = cost × (1 + markup) and profit = price × margin. A 66.67% markup gives a margin of 0.6667 ÷ 1.6667 = 0.40, or 40%; a 40% margin gives a markup of 0.40 ÷ 0.60 = 0.6667, or 66.67%. The conversion is exact, so once you know one you always know the other.
To set a price from a cost and a target markup, use the Markup Calculator; to see how many units you must sell to cover costs, use the Break-Even Calculator.