How it works
Margin and markup both measure the same profit, but as a percentage of two different numbers — margin is profit over revenue (what you sold it for), markup is profit over cost (what it cost you). They're easy to mix up because a 50% markup and a 50% margin describe very different amounts of profit, which is exactly why this calculator shows both at once rather than picking one.
profit = revenue − cost
margin = profit ÷ revenue × 100
markup = profit ÷ cost × 100
Worked example
An item that costs $60 and sells for $100.
- Profit: $100 − $60 = $40.
- Margin: $40 ÷ $100 = 40%.
- Markup: $40 ÷ $60 = 66.7%.
The same $40 of profit is a 40% margin against the sale price, but a 66.7% markup against the cost — same dollars, different denominators.
Common questions
Why is margin always lower than markup, for the same sale?
Because revenue is always the larger number when there's any profit at all, and dividing the same profit by a larger number gives a smaller percentage. Margin can never reach 100% (that would mean cost was zero), but markup has no such ceiling.
Which one should I use for pricing decisions?
Margin is usually more useful for judging overall business profitability, since it's a share of revenue, which is what flows through the rest of your accounts. Markup is more useful at the point of pricing an individual item, since it's a multiplier directly on the cost you already know.