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Profit Margin vs Markup Calculator

Enter a cost and a selling price to see profit, margin and markup side by side, plus the price you need to hit a target margin.

Your numbers

$

What the item or service costs you.

$
%

Shows the price you would need to charge for this margin.

Profit margin

40.00%

Markup

66.67%

Profit per sale
$40.00
Price for your target margin
$120.00
The math behind it

  1. Profit

    $100.00 − $60.00equals$40.00

  2. Margin (profit ÷ price)

    $40.00 ÷ $100.00equals40%

  3. Markup (profit ÷ cost)

    $40.00 ÷ $60.00equals66.67%

  4. Price for a 50% margin

    $60.00 ÷ (1 − 50%)equals$120.00

Margin and markup both describe profit as a percentage, which is why they get mixed up so often. The difference is what you divide by. Margin divides profit by the selling price. Markup divides profit by the cost. For the same sale, markup is always the larger number, and pricing with the wrong one can cost you real money.

How it works

Profit is the selling price minus the cost. Margin is that profit divided by the selling price. Markup is the same profit divided by the cost.

To reach a target margin, divide the cost by (1 minus the margin). For a 50% margin on a $60 cost, that is $60 ÷ 0.5, which is $120. Adding 50% to the cost instead would give only $90, which is a 33.33% margin.

Margin can never reach 100%, because that would mean the item cost nothing. Markup has no upper limit.

A worked example

An item that costs $60 and sells for $100 makes $40 of profit. That is a 40% margin ($40 ÷ $100) and a 66.67% markup ($40 ÷ $60). To earn a 50% margin on the same $60 cost, you would need to charge $120.

Questions people ask

Which should I use for pricing, margin or markup?

Either works as long as you are consistent. Retailers often think in markup because it starts from cost. Finance teams and most business reports use margin because it shows what share of revenue you keep. The mistake to avoid is setting a markup when your target was written as a margin.

How do I convert markup to margin?

Margin = markup ÷ (1 + markup). A 50% markup is 0.5 ÷ 1.5, which is a 33.33% margin. Going the other way, markup = margin ÷ (1 − margin), so a 40% margin is a 66.67% markup.

Is this gross margin or net margin?

It is gross margin on a single sale: price minus the direct cost of what you sold. Net margin also subtracts overheads such as rent, salaries and marketing, which this calculator does not include.

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