Markup vs Margin

Quick Answer

Markup = (Profit / Cost) × 100 — percentage of cost. Margin = (Profit / Price) × 100 — percentage of selling price.

Example: $50 cost, $75 price, $25 profit → 50% markup, 33.3% margin

Markup Formula

Markup = (Price - Cost) / Cost × 100

Markup tells you what percentage you added to your cost. A 50% markup means you added half of your cost on top.

Example: Cost $50, Price $75. Markup = ($75 - $50) / $50 × 100 = 50%

Margin Formula

Margin = (Price - Cost) / Price × 100

Margin tells you what percentage of the selling price is profit. A 33% margin means one-third of your revenue is profit.

Example: Cost $50, Price $75. Margin = ($75 - $50) / $75 × 100 = 33.3%

Visual Comparison

Same item, same profit — but markup and margin show different percentages:

Markup Perspective: Cost: $50 (100%). Profit: $25 (50% of cost). 50% Markup

Margin Perspective: Cost: $50 (66.7%). Profit: $25 (33.3% of price). 33.3% Margin

Markup to Margin Conversion Chart

Use this table to quickly convert between markup and margin:

• 10% markup — 9.1% margin — Price $110, Profit $10 (Cost $100)

• 20% markup — 16.7% margin — Price $120, Profit $20 (Cost $100)

• 25% markup — 20% margin — Price $125, Profit $25 (Cost $100)

• 33.3% markup — 25% margin — Price $133, Profit $33 (Cost $100)

• 50% markup — 33.3% margin — Price $150, Profit $50 (Cost $100)

• 100% markup (Keystone) — 50% margin — Price $200, Profit $100 (Cost $100)

• 150% markup — 60% margin — Price $250, Profit $150 (Cost $100)

• 200% markup — 66.7% margin — Price $300, Profit $200 (Cost $100)

When to Use Markup vs Margin

Use Markup When...

• Setting prices based on your product costs

• Working in wholesale or manufacturing

• Communicating pricing internally

• Calculating prices for quotes

• Your industry uses cost-based pricing standards

Use Margin When...

• Analyzing profitability and financial performance

• Comparing to industry benchmarks

• Reporting to investors or stakeholders

• Working in retail or e-commerce

• Making decisions about discounts and promotions

Common Mistakes to Avoid

Confusing markup with margin: A 30% markup is NOT a 30% margin. If you price at 30% markup expecting 30% margin, you will be short. 30% markup = 23% margin.

Ignoring overhead in markup: Your markup must cover not just product cost, but also operating expenses (rent, labor, marketing). A 50% markup may not leave enough after expenses.

Applying discounts incorrectly: A 20% discount on a 25% margin product wipes out most of your profit. Calculate margin impact before offering discounts.

Track costs and margins with StockZip

StockZip inventory management tracks your item costs and helps you maintain visibility into your margins. Set cost prices, track purchase history, and understand your profitability per item.

Frequently asked questions

What is the difference between markup and margin?

Markup is the percentage added to cost to get the selling price (based on cost). Margin is the percentage of the selling price that is profit (based on price). For the same item, markup percentage is always higher than margin percentage.

What is the markup formula?

Markup = ((Price - Cost) / Cost) × 100. For example, if an item costs $50 and sells for $75, the markup is (($75 - $50) / $50) × 100 = 50%.

What is the margin formula?

Margin = ((Price - Cost) / Price) × 100. For example, if an item costs $50 and sells for $75, the margin is (($75 - $50) / $75) × 100 = 33.3%.

How do I convert markup to margin?

Margin = Markup / (1 + Markup). For example, a 50% markup equals 50% / 150% = 33.3% margin. Alternatively, Margin = Markup / (100 + Markup) × 100.

How do I convert margin to markup?

Markup = Margin / (1 - Margin). For example, a 33.3% margin equals 33.3% / 66.7% = 50% markup. Alternatively, Markup = Margin / (100 - Margin) × 100.

When should I use markup vs margin?

Use markup when setting prices based on your costs (common in wholesale and manufacturing). Use margin when analyzing profitability or comparing to industry benchmarks (common in retail and finance). Many businesses use both.

Why is markup always higher than margin?

Markup is calculated on the smaller number (cost), while margin is calculated on the larger number (price). The same dollar profit divided by a smaller base gives a larger percentage.

What is a good markup percentage?

It varies by industry. Grocery stores might use 10-15% markup. Apparel retail often uses 50-100% (keystone). Jewelry might use 100-300%. Your markup should cover overhead and leave desired profit.

What is a good profit margin?

Gross profit margins vary by industry: grocery 20-25%, apparel retail 45-55%, software 70-90%. Net profit margins are typically 5-20% after all expenses. Compare to your industry benchmarks.

What is keystone pricing?

Keystone pricing is a 100% markup, meaning you double your cost to get the selling price. A $50 cost becomes a $100 price. This gives a 50% margin. Common in apparel and home goods retail.