Margin and markup calculator

Margin and markup are not the same thing

People mix up margin and markup constantly, and it costs money. Both describe the profit on a sale, but they divide it by different numbers. Markup is the profit as a percentage of the cost. Margin is the profit as a percentage of the selling price. For a product that costs 60 and sells for 100, the profit is 40, so the markup is 40 ÷ 60 = 66.7%, and the margin is 40 ÷ 100 = 40%. The same sale, two different percentages.

Why it matters when you set prices

If you want a 40% margin and you add 40% to your cost, you will fall short: 60 plus 40% is 84, which gives a profit of 24 on a price of 84, a margin of 28.6%. To get a 40% margin on a cost of 60 you need to divide the cost by 0.60 to reach a price of 100, which is a markup of 66.7%. The rule of thumb is that the markup is always larger than the margin, and the difference grows as the margin grows. A 50% markup is only a 33.3% margin, and a 100% markup, doubling your cost, is a 50% margin.

The four situations

• Cost and price: you know both and want to see the profit, margin and markup.
• Cost and margin: you want a target margin and need the selling price that delivers it.
• Cost and markup: your business adds a fixed percentage to cost, and you want the resulting price and margin.
• Price and margin: the market sets the price, and you want to know the highest cost you can afford to keep a given margin.

The conversion table

Under the results there is a table that shows, for common margins, the markup that produces them. It is a quick reference for pricing a range of products: to earn a 25% margin you need a 33.3% markup, and for 50% you need 100%.

What it does not do

This is gross margin on a single sale: price minus cost. It does not include overheads, taxes, discounts, shipping or fees, which reduce what you really keep. Prices are treated without tax; if your price includes VAT, remove it first with the VAT calculator. Results are arithmetic, not business advice.