Margin vs markup
Both compare profit to a base, but a different base, which is why the numbers differ:
Margin = profit ÷ selling price × 100 · Markup = profit ÷ cost × 100
Cost $40, price $65: profit is $25, so margin is 25 ÷ 65 = 38.5% and markup is 25 ÷ 40 = 62.5%.
Price for a target margin
Price = cost ÷ (1 − margin ÷ 100)
For a 40% margin on a $40 cost: 40 ÷ 0.60 = $66.67. Adding 40% to the cost ($56) only gives a 28.6% margin, a common pricing mistake.
| Markup | Equals margin of |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.7% |
Margin and markup side by side
Margin is profit as a share of the selling price; markup is profit as a share of the cost. The same sale gives two different percentages:
| Markup on cost | Gross margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
Margin = markup ÷ (1 + markup) · Markup = margin ÷ (1 − margin)
Pricing for a target margin? Divide the cost by (1 − margin). For a 40% margin on a $30 cost: 30 ÷ 0.60 = $50. Adding 40% to the cost ($42) would only give a 28.6% margin.
Common mistakes
- Quoting markup when someone asked for margin makes your business look more profitable than it is.
- Leaving out shipping, card fees or returns from cost overstates both numbers.
- Discounts eat margin fast: a 10% discount on a 30% margin product cuts the margin to about 22%.
Related calculators
- Percentage Calculator: X% of Y, X is what % of Y, and more.
- Discount Calculator: Sale price, savings and stacked discounts.
- Percent Change Calculator: Percentage increase, decrease and difference.
Questions people ask
What is a good profit margin?
It depends on the industry: grocery stores often run on a few percent, while software can exceed 70%. Compare with businesses like yours rather than a single rule.
Can margin be more than 100%?
No. Margin is profit as a share of the price, so it is always below 100%. Markup has no upper limit.
Formula checked October 2026 · How we calculate