Margin and markup calculator
Margin vs markup — what is the difference?
Margin and markup are two different ways of expressing profit on a product, which are often confused. Margin is the ratio of profit to the selling price, while markup is the ratio of profit to the purchase cost. For the same product, the margin will always be lower than the markup.
Used mainly in retail and finance. It tells what percentage of the selling price is profit.
Used when pricing products and services. It tells by what percentage the selling price exceeds the cost.
Example: you buy a product for 100 and sell it for 150. The profit is 50. The margin is 50/150 = 33.3%%, and the markup is 50/100 = 50%%. The same profit amount, but different percentage values.
Conversion table: Margin to Markup
| Margin | Markup | Cost multiplier |
|---|---|---|
| 10% | 11.1% | 1.11 |
| 20% | 25.0% | 1.25 |
| 35% | 53.8% | 1.54 |
| 40% | 66.7% | 1.67 |
| 50% | 100.0% | 2.00 |
| 75% | 300.0% | 4.00 |
* The table shows how much you need to increase the purchase price (markup) to achieve the desired sales margin.
Frequently Asked Questions (FAQ)
Margin is profit divided by selling price, expressed as a percentage. Markup is profit divided by purchase cost. With the same profit, margin always gives a lower percentage result than markup. Example: cost 100, price 150 — margin is 33.3%, markup is 50%.
It depends on the industry. In retail, a typical margin is 20–50%. In food service 60–70%. In IT services or consulting, margins can exceed 70%. What matters is that the margin covers all fixed and variable costs and ensures a net profit.
Formula: Selling price = Cost / (1 - Margin% / 100). Example: cost 100, expected margin 25% → price = 100 / (1 - 0.25) = 133.33. Use the 'Cost + margin' mode in the calculator above.
Formula: Selling price = Cost × (1 + Markup% / 100). Example: cost 100, markup 50% → price = 100 × 1.5 = 150. Use the 'Cost + markup' mode in the calculator above.
Margin is usually calculated on net prices (excluding VAT), because VAT is a tax you remit to the tax office and does not constitute your revenue. Enter net prices into the calculator.
Gross margin only accounts for the cost of producing or purchasing the goods. Net margin additionally accounts for all operating costs: rent, salaries, marketing. The calculator computes gross margin.