Markup vs margin: the difference
Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price. They describe the same profit, but the numbers are different, and mixing them up is one of the most common pricing mistakes. A 50% markup is only a 33.3% margin.
Margin = (Price − Cost) ÷ Price
Price from markup = Cost × (1 + Markup)
Price from margin = Cost ÷ (1 − Margin)
Margin = Markup ÷ (1 + Markup) Markup = Margin ÷ (1 − Margin)
Quick conversion table
| Markup | Margin |
|---|---|
| 25% | 20.0% |
| 50% | 33.3% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
| 300% | 75.0% |
Which one should ecommerce sellers use?
Use margin when you plan profit, ad budgets and discounts, because fees, ad costs and discounts are all charged as a share of the selling price. Markup is handy for quick cost-plus pricing. This calculator uses gross margin, which counts product cost only. For fees, shipping and ads, use the profit margin calculator or the full profit calculator.
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FAQ
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $20 cost gives a $30 price and a 33.3% margin. A 50% margin needs a $40 price, which is a 100% markup.
Can margin be more than 100%?
No. Margin is profit divided by price, so it is always below 100%. Markup can be any size.
How do I convert markup to margin?
Margin = Markup ÷ (1 + Markup). For example, a 100% markup is 1 ÷ 2 = a 50% margin.