What is the difference between margin and markup?
The most popular small-business mistake: "I buy at $100, sell at $130, that's 30% margin". Wrong. That's 23% margin and 30% markup. Two different numbers, even though both come from the same profit.
Type in cost and price, get both values at once, with the formulas shown step by step. Or work backward: you know the cost and target margin, the tool computes the price.
Confusing margin with markup costs real money. A store thinking "30% margin = 30% markup" leaves 7 percentage points of profit on the table on every sale.
How to use it
- Pick a mode: "From cost & price" (I know both, what's the margin and markup?), "Derive price" (I have cost + target margin), "Derive cost" (I have price + target margin).
- In "Derive price" and "Derive cost" modes, the "As margin / As markup" toggle decides how the percent is interpreted. This matters, they give different results.
- Below the result you'll see margin and markup side-by-side with formulas shown step by step.
- A reference table shows typical margin↔markup pairs with industry examples.
When this is useful
Five common scenarios:
- Pricing for an online store. "I buy at $50, what price gives me 40% margin?". "Derive price" mode plus "As margin" toggle = $83.
- Negotiating with a supplier. "I want to keep 30% margin even if I drop retail to $100". "Derive cost" mode shows the max you can pay the supplier: $70.
- Auditing a store or restaurant. Owner says "we run 50% markup". Enter cost $10, markup 50%, get: price $15, margin 33%. Margin is lower than markup. Useful to know when planning profit.
- Pricing education. Why does 100% markup = 50% margin, not 100%? See the formula and step-by-step example here. A classic source of junior-accountant mistakes.
- Industry comparison. The table below the result shows typical pairs: 20% margin/25% markup (wholesale), 50% margin/100% markup (restaurants), 75% margin/300% markup (software/SaaS, consulting). Helps gauge whether your industry is "premium" or "value" priced.
If you run a small business and want to see how many units you need to sell to break even after paying rent, payroll, and other fixed costs, use our break-even calculator.
Questions and answers
Margin is profit calculated as a percentage of the SELLING PRICE. Markup is profit calculated as a percentage of the COST. Concrete example: you buy at $100, sell at $130, profit $30. Margin = 30/130 = 23%. Markup = 30/100 = 30%. The two numbers are NEVER equal (except at zero). Margin is always lower than markup.