Margin vs Markup: The Difference, Formulas and Conversion Table

Why a 50% markup is a 33% margin, how to convert between them, and how to price from a target margin.

Actualizado 2026-10-20

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Markup is profit as a percentage of cost. Margin is profit as a percentage of price. Same dollars, different base, different number.

An item costing $50 sold for $80 has $30 profit. Markup is 30 ÷ 50 = 60%. Margin is 30 ÷ 80 = 37.5%.

Formulas

profit   = price − cost
markup % = profit ÷ cost × 100
margin % = profit ÷ price × 100

Pricing from a target:

price from markup = cost × (1 + markup ÷ 100)
price from margin = cost ÷ (1 − margin ÷ 100)

To get a 40% margin on a $60 cost: 60 ÷ 0.6 = $100. Marking up by 40% instead gives $84 and a margin of only 28.6%, the classic pricing mistake.

Conversion

margin = markup ÷ (1 + markup ÷ 100)
markup = margin ÷ (1 − margin ÷ 100)

Margin can never reach 100% (that would need zero cost); markup has no ceiling.

Which one to use

Retail and wholesale pricing talk in markup, because you start from cost. Financial statements talk in margin, because gross margin is profit over revenue. Keystone pricing (doubling the cost) is a 100% markup and a 50% margin.

Many products

Average margin for a basket is total profit ÷ total revenue, not the average of the individual margins. Two items, one with 50% margin on $10 revenue and one with 10% margin on $1,000 revenue, have a blended margin of (5 + 100) ÷ 1,010 = 10.4%, not 30%. The margin calculator totals the rows for exactly this reason.

Discounts and margin

A 10% discount on a 30% margin item cuts profit by a third: price 100, cost 70, profit 30 becomes price 90, profit 20. Use the discount calculator with the cost to see the effect before running a sale.

Worked examples

Restaurant plate. Food cost $4.20, menu price $14. Profit $9.80. Markup 233%, margin 70%. Restaurants target a 28 to 35% food cost, which is a 65 to 72% gross margin, before labour and overhead.

Retail with a sale. Jacket cost $48, marked up 100% to $96 (50% margin). A 25% off sale takes the price to $72: profit $24, margin 33.3%, markup 50%. The sale cut profit in half while cutting the price by a quarter.

Service hour. A consultant paying a contractor $60 an hour and billing $85 has a 29.4% margin and 41.7% markup. To reach a 40% margin the bill rate must be $60 ÷ 0.6 = $100.

Blended basket. Three items sold in one order: $30 at 60% margin, $200 at 25% margin, $70 at 40% margin. Profit: 18 + 50 + 28 = $96 on $300 revenue, blended margin 32%. The simple average of the three margins is 41.7%, which overstates it because the low-margin item dominates revenue.

Gross versus net margin

Everything above is gross margin: revenue minus the direct cost of the item. Net margin subtracts all operating costs, interest and tax. A retailer with a 45% gross margin commonly has a 3 to 8% net margin. When someone quotes “margin” without a qualifier in a pricing discussion they mean gross.

Frequently asked

Is a 100% margin possible? No. Margin is profit over price, and profit cannot exceed price unless cost is negative. 100% markup, however, simply means price is double cost.

What markup gives a 30% margin? 42.9%: 30 ÷ (1 − 0.30). Marking up by 30% gives only a 23.1% margin.

Which is larger? Markup is always larger than margin for the same transaction because its denominator (cost) is smaller than price.

How do I price with a target margin and sales tax? Compute the pre-tax price from cost and margin first, then add tax; tax is collected for the state and is not revenue.

Does margin include shipping? Include every direct cost of getting the item to the customer in the cost figure, or your margin is overstated.