Markup vs margin: markup is profit divided by cost, margin is profit divided by selling price. Buy a product for $20 and sell it for $30, and the $10 profit is a 50% markup but a 33.3% margin. Margin can never reach 100%; markup can. To convert, margin = markup ÷ (1 + markup).
Both numbers describe the same profit, just measured against different bases, which is exactly why they get mixed up. The mix-up is expensive: price a product with a 40% markup when you meant a 40% margin and you keep 28.6% instead. This guide explains the difference, gives the conversion formulas and a markup-to-margin table, works through examples, and lists the mistakes to avoid.
- Markup = (price − cost) ÷ cost. It answers "how much did I add on top of cost?"
- Margin = (price − cost) ÷ price. It answers "how much of each sale do I keep?"
- Same profit, different base: markup is always the bigger percentage.
- Convert: margin = markup ÷ (1 + markup); markup = margin ÷ (1 − margin).
- Common pairs: 25% markup = 20% margin; 50% = 33.3%; 100% (keystone) = 50%.
What is the difference between markup and margin?
Markup measures profit against what you paid; margin measures profit against what the customer paid. The profit in dollars is identical. Only the denominator changes.
| Markup | Margin | |
|---|---|---|
| Formula | (Price − cost) ÷ cost | (Price − cost) ÷ price |
| Based on | Cost | Selling price |
| $20 cost, $30 price | 10 ÷ 20 = 50% | 10 ÷ 30 = 33.3% |
| Can it exceed 100%? | Yes (200%, 300%...) | No, it always stays below 100% |
| Typical use | Setting a price from cost | Reporting profitability, comparing products |
| Price from cost | Cost × (1 + markup) | Cost ÷ (1 − margin) |
Retailers and wholesalers often talk in markup because it's quick to apply to a cost. Accountants, investors and most financial reports use margin because it ties directly to revenue. If someone quotes "40%" without saying which, ask.
Markup to margin conversion table
Use this table to translate between the two. Each row describes the same price.
| Markup | Margin | $10 cost sells for | Profit |
|---|---|---|---|
| 10% | 9.1% | $11.00 | $1.00 |
| 20% | 16.7% | $12.00 | $2.00 |
| 25% | 20% | $12.50 | $2.50 |
| 33.3% | 25% | $13.33 | $3.33 |
| 42.9% | 30% | $14.29 | $4.29 |
| 50% | 33.3% | $15.00 | $5.00 |
| 66.7% | 40% | $16.67 | $6.67 |
| 100% | 50% | $20.00 | $10.00 |
| 150% | 60% | $25.00 | $15.00 |
| 200% | 66.7% | $30.00 | $20.00 |
| 300% | 75% | $40.00 | $30.00 |
| 400% | 80% | $50.00 | $40.00 |
Notice how margin flattens out: going from a 100% to a 400% markup only moves margin from 50% to 80%. Margin approaches 100% but never reaches it, since that would mean the product cost nothing.
How do you convert markup to margin?
Divide the markup by 1 plus the markup, using decimals. A 50% markup is 0.50 ÷ 1.50 = 0.333, or a 33.3% margin.
- Write the markup as a decimal: 60% becomes 0.60.
- Add 1: 1.60.
- Divide the markup by that number: 0.60 ÷ 1.60 = 0.375.
- Multiply by 100: a 60% markup is a 37.5% margin.
How do you convert margin to markup?
Divide the margin by 1 minus the margin. A 40% margin is 0.40 ÷ 0.60 = 0.667, or a 66.7% markup.
- Write the margin as a decimal: 25% becomes 0.25.
- Subtract it from 1: 0.75.
- Divide the margin by that number: 0.25 ÷ 0.75 = 0.333.
- Multiply by 100: a 25% margin is a 33.3% markup.
Markup and margin examples
Example 1: pricing from a supplier cost
A phone case costs you $6 and you want a 60% margin. Price = $6 ÷ (1 − 0.60) = $6 ÷ 0.40 = $15. Profit is $9. Check: 9 ÷ 15 = 60% margin, and 9 ÷ 6 = 150% markup.
Example 2: keystone pricing
Many boutiques and gift shops double the wholesale cost, called keystone pricing. A $12 wholesale candle sells for $24: a 100% markup and a 50% margin.
Example 3: reading a profit report
Your shop sold $5,000 of goods that cost $3,000. Profit is $2,000. Margin: 2,000 ÷ 5,000 = 40%. Markup: 2,000 ÷ 3,000 = 66.7%. Both are correct; the report should say which one it shows.
The examples above use only the product cost. Online, fees, shipping and ads also come out of each sale, so a healthy-looking markup can hide a thin real margin. Our free profit margin calculator shows profit, margin, markup and ROI side by side after every cost (its markup uses product cost as the base). For the full method, see how to calculate profit margin.
Common markup vs margin mistakes
The big one is applying a margin target as a markup, which always leaves you short.
| Mistake | Example | Result | Correct way |
|---|---|---|---|
| Adding the margin % to cost | Want 40% margin on $20: price $28 | 8 ÷ 28 = 28.6% margin | $20 ÷ 0.60 = $33.33 |
| Subtracting markup to find cost | $30 price, 50% markup: cost "$15" | Cost is really $20 | Cost = price ÷ (1 + markup) |
| Comparing markup with a competitor's margin | "Our 50% beats their 40%" | Yours is 33.3% margin | Convert to the same base first |
| Discounting by the markup | 50% markup, so "50% off breaks even" | 50% off loses $5 on a $30 sale | Max discount at break-even = margin (33.3%) |
| Ignoring fees in either number | Markup on product cost only | Real profit is lower | Include every per-unit cost |
The discount row is worth repeating: the deepest discount that only breaks even (before fees and shipping) equals your margin, not your markup. Our guide to calculating discount percentage covers safe sale pricing in detail.
Should I use markup or margin?
Use margin to set targets and judge profitability, and markup only as a shortcut once you know which markup produces your target margin.
- Set your goal as a margin (for example 50%), because it relates directly to revenue and to how deep you can discount.
- Convert it to a markup if that's easier to apply on a spreadsheet: a 50% margin is a 100% markup, so double the cost.
- Label every number in reports and supplier conversations as markup or margin.
- Re-check after costs change: a fixed markup on a rising cost keeps margin the same percentage, but percentage fees on top can still squeeze it.
If you make your own products, labor and overhead belong in the cost before any markup; how to price handmade products walks through that.
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What is the difference between markup and margin?
Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A $20 item sold for $30 has a 50% markup and a 33.3% margin. The profit in dollars is the same.
Is a 50% markup the same as a 50% margin?
No. A 50% markup gives a 33.3% margin. To get a 50% margin you need a 100% markup, which means doubling the cost.
How do you convert markup to margin?
Divide the markup by 1 plus the markup, as decimals. A 25% markup is 0.25 ÷ 1.25 = 0.20, so a 20% margin.
How do you calculate a 30% margin?
Divide the cost by 0.70. A $14 cost needs a $20 price for a 30% margin, which is a 42.9% markup.
What is keystone markup?
Keystone pricing means doubling the wholesale cost to set the retail price. That is a 100% markup and a 50% margin, common in boutiques and gift retail.
Why is markup always higher than margin?
Both use the same profit, but markup divides it by cost and margin divides it by the price, which is larger. Dividing by a larger number gives a smaller percentage, so margin is always lower.
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