Margin vs markup — the $10 difference
They sound interchangeable and they are not. Say your cost is $60 and you want "40%". Apply it as markup and you price at $84, earning $24. Apply it as margin and you price at $100, earning $40 — a $16 difference per unit from one confused word. The trap runs one direction: using markup math to hit a margin target always under-prices, because margin is measured against the bigger number.
Equivalents worth memorizing
| Markup | Equals margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
| 300% | 75% |
Pricing several products to reach overall profitability? Pair this with the break-even calculator to see how many units your margins must carry.
Frequently asked
What's the difference between margin and markup?
Both compare profit to something — margin compares it to the selling price, markup compares it to the cost. Selling a $50 item for $100 is a 50% margin but a 100% markup. Mixing them up is one of the most expensive small-business math errors.
How do I calculate profit margin?
Margin = (price − cost) ÷ price × 100. A product costing $60 and selling for $100 has a margin of (100 − 60) ÷ 100 = 40%.
How do I price a product for a target margin?
Price = cost ÷ (1 − target margin). For a 40% margin on a $60 cost: $60 ÷ 0.6 = $100. Note it's not cost × 1.4 — that's applying markup math to a margin target, and it under-prices you.
What is a good profit margin?
It varies enormously by industry — groceries run on thin single-digit margins while software can exceed 70%. Compare against your own industry's norms rather than a universal number.