Markup vs. margin
Markup is profit as a percentage of cost. Margin is profit as a percentage of the selling price. Because the price is always larger than the cost, margin is always lower than markup for the same product. Confusing the two is one of the most common pricing mistakes small businesses make.
Margin % = (Price − Cost) ÷ Price × 100
Price from margin = Cost ÷ (1 − Margin/100)
Quick conversion table
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
| 300% | 75% |
Example
An item costs $60. A 50% markup gives a $90 price, but your margin is only $30 ÷ $90 = 33.3%. If you need a 40% margin, price it at $60 ÷ 0.60 = $100.
FAQs
Is a 50% markup the same as a 50% margin?
No. A 50% markup produces a 33.3% margin. To get a 50% margin you need a 100% markup (doubling the cost).
Which should I use for pricing?
Use margin when you think about profitability and financial statements; use markup when building prices from cost. This calculator shows both so you can sanity-check.
What is keystone pricing?
Keystone pricing means doubling the wholesale cost, i.e. a 100% markup and a 50% gross margin. It is a common starting point in retail.