Markup vs Margin: Formulas and Conversion Chart
Markup and margin both describe profit as a percentage, which is why they get confused. The difference is the denominator.
The two formulas
Markup = (Price − Cost) ÷ Cost Margin = (Price − Cost) ÷ Price
Buy a lamp for $40 and sell it for $60. Profit is $20. Markup is $20 ÷ $40 = 50%. Margin is $20 ÷ $60 = 33.33%. Same sale, two very different numbers.
Why it matters
If you want a 50% margin but price with a 50% markup, you fall short by almost 17 points. On $100,000 of sales that is roughly $16,700 of expected profit that never shows up.
Converting between them
Margin = Markup ÷ (1 + Markup) Markup = Margin ÷ (1 − Margin)
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33.33% |
| 75% | 42.86% |
| 100% | 50% |
| 200% | 66.67% |
Which one should you use?
Retailers often set prices with markup because it starts from a known cost. Accountants and investors report margin because it compares to revenue. Use the profit margin calculator when you need the margin view.
Try it with your own numbers.
Open the markup calculator