Finance
Markup vs Margin: Formulas and a Two-Way Conversion Table
The difference between markup and margin, both conversion formulas, two-way tables from 5% to 300%, pricing for a target margin and the mistakes that cost money.
By TooleemPublished Facts checked
Short answer
Markup is profit divided by cost; margin is profit divided by price. The same sale gives two different percentages: buy at 60, sell at 100, and the markup is 66.7% while the margin is 40%. To convert, use margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin). A 50% markup is only a 33.3% margin, and a 50% margin needs a 100% markup.
Do the calculation
Markup Calculator
Enter a cost and a markup or a target margin to get the selling price, the profit and the other percentage.
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Definitions and formulas
| Aspect | Markup | Margin |
|---|---|---|
| Divides profit by | Cost | Selling price |
| Formula | (price − cost) ÷ cost | (price − cost) ÷ price |
| Cost 60, price 100 | 40 ÷ 60 = 66.7% | 40 ÷ 100 = 40% |
| Can exceed 100%? | Yes, without limit | No, always below 100% |
| Typical user | Buyers and pricing sheets: “cost plus 30%” | Accounts and reports: gross margin |
Converting
margin = markup ÷ (1 + markup) markup = margin ÷ (1 − margin)
Use decimals in the formulas: a 25% markup is 0.25, so the margin is 0.25 ÷ 1.25 = 0.20, or 20%.
Markup to margin table (5% to 300%)
| Markup | Margin | Price on cost 100 |
|---|---|---|
| 5% | 4.8% | 105 |
| 10% | 9.1% | 110 |
| 15% | 13.0% | 115 |
| 20% | 16.7% | 120 |
| 25% | 20.0% | 125 |
| 30% | 23.1% | 130 |
| 33.3% | 25.0% | 133.33 |
| 40% | 28.6% | 140 |
| 50% | 33.3% | 150 |
| 60% | 37.5% | 160 |
| 75% | 42.9% | 175 |
| 80% | 44.4% | 180 |
| 100% | 50.0% | 200 |
| 120% | 54.5% | 220 |
| 150% | 60.0% | 250 |
| 200% | 66.7% | 300 |
| 250% | 71.4% | 350 |
| 300% | 75.0% | 400 |
Margin to markup table (5% to 90%)
| Target margin | Markup needed | Price on cost 100 |
|---|---|---|
| 5% | 5.3% | 105.26 |
| 10% | 11.1% | 111.11 |
| 15% | 17.6% | 117.65 |
| 20% | 25.0% | 125 |
| 25% | 33.3% | 133.33 |
| 30% | 42.9% | 142.86 |
| 33.3% | 50.0% | 150 |
| 35% | 53.8% | 153.85 |
| 40% | 66.7% | 166.67 |
| 45% | 81.8% | 181.82 |
| 50% | 100.0% | 200 |
| 55% | 122.2% | 222.22 |
| 60% | 150.0% | 250 |
| 65% | 185.7% | 285.71 |
| 70% | 233.3% | 333.33 |
| 75% | 300.0% | 400 |
| 80% | 400.0% | 500 |
| 90% | 900.0% | 1000 |
Pricing for a target margin
If you know the margin you need, divide the cost by (1 − margin). Do not add the margin percentage to the cost: that gives a markup of that size, and a smaller margin.
price = cost ÷ (1 − target margin)
Worked example
A product that costs 36 and needs a 40% margin
36 ÷ (1 − 0.40) = 36 ÷ 0.60 = 60
Check: profit 24, and 24 ÷ 60 = 40%. Adding 40% to the cost would have given 36 × 1.40 = 50.40, a margin of only 28.6%.
Prices that include sales tax or VAT need one more step: work out the price before tax first, then add the tax. Margin is always measured on the price you keep, not the price the customer pays.
Mistakes that cost money
- Adding the margin to the cost. The most common error, shown above: a “40% margin” priced as cost + 40% earns 28.6%.
- Comparing a supplier’s markup with your margin target. A wholesaler’s “30% markup” and your “30% margin” are different numbers: 30% markup is a 23.1% margin.
- Discounting from a markup price. A 20% discount on a product with a 25% markup leaves zero profit: cost 100, price 125, discounted price 100.
- Leaving costs out of “cost”. Shipping, payment fees and packaging belong in the cost before you apply a markup, or the margin on paper will be higher than in the bank.
To see how much you must sell to cover fixed costs at a given margin, continue with the break-even calculator.
Do the calculation
Markup Calculator
Enter a cost and a markup or a target margin to get the selling price, the profit and the other percentage.