Margin vs. Markup Calculator

See margin and markup side by side for the same sale.

What it costs you to produce or acquire the item.

What you sell it for.

Margin —
  • Markup —
  • Profit —

freebusinesscalcs.com ·

Advertisement

The Difference, in One Formula Each

Margin = Profit ÷ Selling Price × 100

Markup = Profit ÷ Cost × 100

Same profit, two different denominators — that’s the entire source of the confusion.

What Each Input Means

Cost is what it costs you to produce or acquire the item.

Selling Price is what you sell it for.

Worked Example

Cost $600, sells for $1,000: Profit = $400. Margin = $400 ÷ $1,000 = 40%. Markup = $400 ÷ $600 = 66.7%. Same $400 of profit, two very different-looking percentages.

Advertisement

Frequently Asked Questions

Why are margin and markup different numbers for the same sale?

Margin divides profit by selling price; markup divides profit by cost. Selling price is always higher than cost when there's a profit, so dividing by the smaller number (cost) always gives a bigger percentage. They only match when cost is $0.

Which one should I use to set my prices?

Markup is usually easier for setting prices, since you're starting from a known cost. Margin is usually more useful for judging overall profitability, since it's a percentage of the revenue that actually lands in your business.

Is there a formula to convert between them?

Yes: margin = markup / (1 + markup), and markup = margin / (1 - margin), both expressed as decimals. For example, a 50% markup converts to a 33.3% margin.

The calculators and information on FreeBusinessCalcs.com are provided for general informational and educational purposes only. Results are estimates and may not match your actual results. We do not provide legal, tax, accounting, financial, investment, or other professional advice. Laws, rates, and other information can change, so you should verify important information and talk with a qualified professional when needed. You are responsible for how you use the results. To the fullest extent allowed by law, FreeBusinessCalcs.com is not responsible for losses or damages resulting from your use of our calculators or information. The calculators contained on FreeBusinessCalcs.com were developed for United States residents only.