Markup vs margin: what’s the difference?
These two are often confused, even though they describe the same sale from two angles:
| Term | Calculated on | Example |
|---|---|---|
| Markup | Cost | Cost 100 + 50% markup = sell at 150 |
| Margin | Selling price | Selling at 150 = 33.3% margin (50 of 150) |
The same deal (50 profit on a 100 cost) is a 50% markup but only a 33.3% margin. That’s why this calculator always shows both numbers, to avoid pricing mistakes.
Formulas
- From markup: selling price = cost × (1 + markup%).
- From margin: selling price = cost ÷ (1 − margin%).
Which one should you use?
- Markup is common among shop owners and small sellers pricing products by hand.
- Margin is the standard in accounting and financial analysis, because it shows directly how much of every unit of sales is profit.
Frequently Asked Questions
Why is markup always higher than margin?
Because the denominator differs. Markup divides the profit by the cost (a smaller number), while margin divides it by the selling price (a bigger number that already includes the profit), so margin is always the smaller percentage.
Can a profit margin be 100% or more?
No. A 100% margin would mean the product cost nothing. Markup, on the other hand, can be any size, for example a 200% markup triples the cost.
Should I add VAT to the price calculated here?
This calculator gives the price before tax. If your products are subject to VAT, add it on top using our VAT calculator.