"We need a 30% margin" and "add 30% to the cost" sound like the same instruction. They aren't, and mixing them up quietly eats into profit. Margin and markup use the same profit figure but divide it by different numbers.
The formulas
- Profit = selling price − cost
- Margin = profit ÷ selling price × 100
- Markup = profit ÷ cost × 100
Example: you buy at 75 and sell at 100. Profit is 25.
- Margin: 25 ÷ 100 = 25%
- Markup: 25 ÷ 75 = 33.33%
Same sale, two different percentages. Margin is always the smaller one when you make a profit.
Why it matters
Suppose you want a 30% margin on a product that costs 70. If you "add 30%", you price it at 91. Your profit is 21, and your margin is only 21 ÷ 91 = 23%. To really get 30% you need:
Price = cost ÷ (1 − margin) → 70 ÷ 0.70 = 100
Margin to markup conversion table
| Margin | Markup needed |
|---|---|
| 10% | 11.11% |
| 20% | 25% |
| 25% | 33.33% |
| 30% | 42.86% |
| 40% | 66.67% |
| 50% | 100% |
| 60% | 150% |
| 75% | 300% |
The formulas behind the table: markup = margin ÷ (1 − margin) and margin = markup ÷ (1 + markup), using decimals.
Working backwards from a price
Marketplaces and retailers often fix the selling price. Then the question is how much you can pay for the goods:
Maximum cost = price × (1 − margin)
For a 120 price and a 40% target margin: 120 × 0.60 = 72 maximum cost.
How to calculate margin and markup
- Open the Profit Margin Calculator.
- Choose what you know: cost and selling price, cost and a target margin, cost and a target markup, or selling price and a target margin.
- Enter the two values.
- Read the profit, gross margin and markup side by side — or the selling price or maximum cost you need. A loss is shown clearly if the price is below cost.
Mistakes to avoid
- Mixing tax in. Enter cost and price both before tax, or both after.
- Forgetting fees. Shipping, platform commission and payment fees belong in the cost if you want them counted.
- Discounting from margin. A 20% sale on a 25% margin product leaves almost nothing. Check the deal with the Discount Calculator first.
FAQ
Can margin be 100% or more? No — margin is a share of the price, so it stays below 100% unless the cost is zero. Markup has no upper limit.
Which should I use? Accountants and investors talk in margin; many shops set prices by markup. Use whichever you like, but say which one you mean.
Try it now
Check any price with the free Profit Margin Calculator — it runs in your browser.