Markup vs Margin Explained
Markup and margin are the most commonly confused numbers in small-business pricing — and the mix-up has a real, compounding cost.
Markup% = profit ÷ cost (profit as a % of what you paid). Margin% = profit ÷ selling price (profit as a % of what you charge). A 50% markup is only a 33.3% margin — never the same number.
Why the confusion is costly
If you aim for a '50% margin' but accidentally price using the 50%-markup formula, you'll under-price every sale by a meaningful amount that compounds across hundreds of transactions — a quiet, hard-to-notice profit leak.
Which one to use when
Margin is usually more useful for profitability planning — it tells you what share of revenue is actually profit. Markup is more common in retail/wholesale pricing conversations, where pricing is often discussed as 'cost plus X%'.
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Frequently Asked Questions
Can margin ever be 100% or more?↓
No — margin is always below 100%, since profit can never exceed the full selling price. Markup, by contrast, can exceed 100% (e.g. selling at 3x cost is a 200% markup).
Is there a quick way to convert between them?↓
margin% = markup% ÷ (1 + markup%), and markup% = margin% ÷ (1 − margin%) — or just use a calculator that shows both from either input.