Markup vs Margin: The Difference, the Formulas, and a Calculator
Markup and margin describe the same profit from two different directions. Markup measures profit against what you paid; margin measures it against what you charge:
- Markup = (price − cost) ÷ cost
- Margin = (price − cost) ÷ price
Buy a product for $40 and sell it for $60, and your profit is $20 — a 50% markup but only a 33.3% margin. Same transaction, two very different-looking percentages.
Try it
Same numbers, two different percentages — that's the whole confusion.
Why mixing them up costs you money
The classic mistake: your target is a 50% margin, so you multiply cost by 1.5 — but that’s a 50% markup, which is only a 33% margin. On a $40 product you price at $60 instead of the $80 your target actually required. You’re leaving $20 per unit on the table while believing you hit your number.
The direction of the error is always the same, because margin is always smaller than markup for the same transaction (profit is divided by the bigger number). If a percentage looks too good to be true, it’s probably the markup.
Conversion table
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.7% |
| 300% | 75% |
The conversions: margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin).
Which one should you use?
Use margin for financial planning — it’s what your P&L, your break-even math, and your ad economics are built on (a 30% margin means 30 cents of every revenue dollar survives variable costs). Use markup as a pricing shortcut at the shelf (“we mark up wholesale 100%”). Just never feed a markup number into a margin formula: tools like our break-even calculator and breakeven ROAS calculator expect true margins, and the CAC & LTV calculator is only honest when the gross margin input is a real margin, not a markup.