How is profit margin different from markup?
Margin divides profit by the selling price; markup divides it by the cost. The same $50 profit on a $100 cost is a 50% markup but only a 33.33% margin.
Profit Margin & Markup
Margin and markup side by side.
Enter price and cost.
Include shipping and fees in the cost for a true margin.
How it is worked out
- Profit = price − cost
- Margin = profit ÷ price
- Markup = profit ÷ cost
- Price for a target margin = cost ÷ (1 − margin)
Example: Sell for $150 something that costs $100: $50.00 profit, a 33.33% margin and a 50.00% markup. For a 40% margin on the same cost, charge $166.67.
About the Profit Margin & Markup
Margin and markup side by side, because they are not the same number.
How to use this tool
- Enter the selling price, or your total revenue.
- Enter the total cost, including shipping and fees.
- Read profit, margin and markup side by side.
Frequently asked questions
How do I price for a target margin?
Price = cost ÷ (1 − target margin). For a 40% margin on a $100 cost: $100 ÷ 0.6 = $166.67. Adding 40% to the cost instead gives $140, which is only a 28.57% margin.
How do I turn a markup into a margin?
Margin = markup ÷ (1 + markup). A 50% markup is a 33.33% margin; a 100% markup is a 50% margin.
What is the difference between gross and net margin?
Gross margin uses only the direct cost of what you sold. Net margin uses every cost, including rent, wages, interest and tax. Enter direct costs here for gross margin, or all costs for net margin.
What if revenue or cost is zero?
A ratio with a zero denominator is shown as not available rather than as zero.