Profit Margin vs Markup: What's the Difference?

The two formulas

Both start from the same profit: selling price minus cost. Markup divides that profit by the cost: markup % = (price - cost) / cost x 100. Margin divides the same profit by the price: margin % = (price - cost) / price x 100.

The only difference is the denominator — cost for markup, price for margin — and that is exactly why the two percentages never match.

A worked example

An item costs you $60 and you sell it for $90. The profit is $30. Markup = 30 / 60 = 50%. Margin = 30 / 90 = 33.3%. Same $30 profit, same item — two different percentages depending on what you compare it to.

Why the difference matters

Because margin is always the smaller number, quoting a markup as if it were a margin makes a business look more profitable than it is — and prices set on that mistake come in too low. Retail and wholesale often talk in markup; finance and accounting usually talk in margin. Always know which one a number is.

Converting between them

To turn a markup into a margin: margin = markup / (1 + markup), using decimals. A 50% markup is 0.5 / 1.5 = 0.333, or 33.3% margin. To go the other way: markup = margin / (1 - margin). A 40% margin is 0.4 / 0.6 = 0.667, a 66.7% markup.

The Markup & Margin Calculator does both directions so you never have to second-guess a supplier quote.

Frequently asked questions

Which is bigger, markup or margin? Markup, always — it divides by the smaller number (cost), so the same profit yields a larger percentage.

Can margin ever exceed 100%? No — margin is a share of the selling price, so it approaches but never reaches 100%. Markup has no upper limit.

Which should I price with? Decide the margin you need to cover costs and profit, then convert to the markup you apply at the till.