Markup and margin are two of the most confused concepts in business and pricing — yet they are completely different calculations. Using the wrong formula can cost you thousands in lost profit. This guide explains the exact difference, how to calculate each one, and includes a full conversion table.
• Markup = Profit as a % of Cost
• Margin = Profit as a % of Revenue (Selling Price)
What Is Markup?
Markup is the amount added to cost price to arrive at selling price. It is expressed as a percentage of the cost.
Selling Price = Cost x (1 + Markup%)
Markup Example
Cost = $50 | Markup = 40% Selling Price = $50 x 1.40 = $70 Profit = $70 - $50 = $20
What Is Profit Margin?
Profit margin is the percentage of revenue that remains as profit after deducting costs. It is calculated as a percentage of selling price.
Selling Price = Cost / (1 – Margin%)
Margin Example
Cost = $50 | Margin = 40% Selling Price = $50 / (1 - 0.40) = $50 / 0.60 = $83.33 Profit = $83.33 - $50 = $33.33
Markup vs Margin — Key Differences
| Feature | Markup | Margin |
|---|---|---|
| Based on | Cost price | Selling price (revenue) |
| Formula | Profit / Cost x 100 | Profit / Revenue x 100 |
| Higher or lower? | Always HIGHER than margin | Always LOWER than markup |
| Used by | Retailers, wholesalers | Finance teams, investors |
| Max possible value | Unlimited (can exceed 100%) | Always under 100% |
Markup vs Margin Conversion Table
| Markup % | Equivalent Margin % | Cost ($50) | Selling Price | Profit |
|---|---|---|---|---|
| 10% | 9.09% | $50 | $55 | $5 |
| 20% | 16.67% | $50 | $60 | $10 |
| 25% | 20.00% | $50 | $62.50 | $12.50 |
| 40% | 28.57% | $50 | $70 | $20 |
| 50% | 33.33% | $50 | $75 | $25 |
| 100% | 50.00% | $50 | $100 | $50 |
| 200% | 66.67% | $50 | $150 | $100 |
How to Convert Markup to Margin (and Vice Versa)
Markup to Margin
Margin = Markup / (1 + Markup) Example: 40% markup = 0.40 / 1.40 = 28.57% margin
Margin to Markup
Markup = Margin / (1 - Margin) Example: 30% margin = 0.30 / 0.70 = 42.86% markup
Industry Markup Benchmarks
| Industry | Typical Markup | Equivalent Margin |
|---|---|---|
| Grocery / Food retail | 5–25% | 4.8–20% |
| Clothing / Fashion | 100–300% | 50–75% |
| Electronics | 10–30% | 9–23% |
| Restaurants | 200–500% | 67–83% |
| Software / SaaS | 200–500%+ | 67–83% |
| Jewellery | 50–100% | 33–50% |
When to Use Markup vs Margin
- Use markup when pricing products — easier to set selling price from cost
- Use margin when analyzing profitability — preferred by investors and finance teams
- Retail and wholesale businesses think in markup
- Financial statements, P&L reports use margin
Frequently Asked Questions
What is the difference between markup and margin?
Markup is profit as a percentage of cost, while margin is profit as a percentage of selling price. A 50% markup results in only a 33.3% margin — they are never equal.
Is markup always higher than margin?
Yes. Markup divides by cost (smaller number), margin divides by selling price (larger number), so markup % is always higher than margin % for the same profit.
How do I convert 30% margin to markup?
Markup = 0.30 / (1 – 0.30) = 0.30 / 0.70 = 42.86% markup.
Why do businesses confuse markup and margin?
Both are expressed as percentages and relate to profit, so many small business owners use them interchangeably — leading to under-pricing and lost profit. Always clarify whether a percentage refers to cost or revenue.
Conclusion
Markup is based on cost; margin is based on revenue. Use the conversion table above to quickly switch between the two. Use our free markup and margin calculators to instantly compute selling prices, profit percentages, and business financials.