Margin vs Markup

• Margin (profit margin) is the portion of the selling price that is profit. In other words: what percentage of the final sale price you keep after covering the cost.
• Markup is the percentage added to cost in order to reach the selling price. It tells you how much above cost you charge, expressed relative to cost.

These two measure the same underlying idea (profit), but from opposite starting points margin looks at profit as a share of revenue, while markup looks at profit as a multiple of cost.

Core formulas

• Profit = Revenue − Cost.
• Margin (%) = (Profit / Revenue) × 100.
• Markup (%) = (Profit / Cost) × 100.
• If you know cost and margin: Revenue = Cost / (1 − Margin/100).
• If you know cost and markup: Revenue = Cost × (1 + Markup/100).
• Convert margin → markup: Markup = (1 / (1 − Margin)) − 1 (expressed as decimals, then ×100 for percent).
• Convert markup → margin: Margin = Markup / (1 + Markup) (again use decimals).

How to use this two-set calculator

1. Always enter Cost first. The calculator needs a cost baseline to compute revenue and profit.
2. For each set, enter exactly one other value (Margin, Markup, Revenue or Profit). The app will fill the remaining fields. This mirrors real pricing decisions: you either pick a target margin, decide on a markup, set a required revenue, or target an absolute profit.
3. If you open the second set (optional), you can test alternative pricing scenarios side by side for example, your current price versus a promotional price or two supplier quotes. The comparison box then highlights which set delivers higher profit, margin or markup so you can make an apples-to-apples decision.

A worked example

• Cost = $100. You want a 30% margin.
  • Revenue = 100 / (1 − 0.30) = $142.86
  • Profit = $42.86
  • Markup = (42.86 / 100) × 100 = 42.86%
    If instead you set a 42.86% markup on $100, you reach the same revenue: $100 × (1 + 0.4286) ≈ $142.86. This demonstrates why margin and markup numbers are not interchangeable – 30% margin equals about 42.86% markup.

When to use margin and when to use markup

• Use margin when you care about how much of the final sale price is profit that’s common in reporting, investor presentations, and gross margin targets.
• Use markup when you’re setting prices operationally from cost (e.g., “add 50% to cost”) common in retail purchasing and simple pricing rules. Both are useful; pick the metric that matches your decision (reporting vs pricing rule).

Practical tips and best practices

• Round sensibly: For public prices, round to consumer-friendly numbers (e.g., $9.99) but keep internal calculations precise.
• Watch margin caps: You can’t set a margin of 100% or more mathematically that would imply infinite or negative costs. Your calculator prevents unrealistic inputs.
• Factor variable costs and overhead: Use an accurate ‘cost’ figure that includes direct costs and any incremental overhead tied to the unit you sell. For strategic or long-term pricing, include allocated overhead to avoid underpricing.
• Test scenarios: Use the second set to model promotions, bulk discounts, or supplier cost increases. Compare profit per unit and margin to understand trade-offs.

Common pitfalls

• Mixing up margin and markup when communicating targets specify which metric you mean by adding “margin” or “markup.”
• Using cost that’s too narrow if you omit shipping, packaging, or transaction fees, your calculated profit will be misleading.
• Ignoring volume sensitivity a higher per-unit profit might reduce demand; always pair price tests with estimated volume elasticity when possible.

Who benefits most from this calculator

• Small business owners and retailers testing price points.
• Procurement teams comparing supplier quotes.
• Accountants and CFOs modeling gross margin scenarios.
• E-commerce managers building catalog pricing rules.
  If you use this tool for many SKUs, export the results or integrate the math into your pricing spreadsheet to batch compute outcomes.

FAQs

Q1. Is markup always higher than margin?

A: Numerically, markup % is usually higher than the corresponding margin % because markup is measured against cost while margin is measured against revenue. (E.g., 30% margin ≈ 42.86% markup.)

Q2. If I want a $50 profit on a $200 cost, what markup do I need?

A: Markup = (50 / 200) × 100 = 25%. Revenue = $250; Margin = 50/250 = 20%.

Q3. Which number should I report to investors?

A: Use margin, since margins express profitability relative to revenue and are standard in financial reporting.

Sources: This calculator is built using standard financial pricing formulas referenced by trusted business and finance platforms like: Omni Calculator, Consero Global, Calculator Soup, Neos Chronos, Profits Plus, Sonovate, WTPrints, Ecom Vivid, InFlow Inventory, Calculator Soup (Margin Calculator).

Also see:

• Margin Calculator.
• ROAS Calculator.
• Break Even Roas Calculator.