Markup vs Margin: The Difference Explained
These two terms get used interchangeably in casual conversation, but they're calculated from different bases and produce different prices for the same target percentage — a mix-up that has quietly underpriced a lot of products.
By Marginory teamContent reviewed
Two formulas, two different bases
| Term | Formula | Denominator |
|---|---|---|
| Markup | (Price − Cost) ÷ Cost × 100 | Cost |
| Margin | (Price − Cost) ÷ Price × 100 | Selling price |
Conversion table
| Target margin | Equivalent markup |
|---|---|
| 10% | 11.1% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
Why this mix-up causes underpricing
A seller aiming for a "30% profit" who applies a 30% markup instead of a 30% marginends up with an actual margin of about 23%, not 30% — a meaningful gap that compounds across every sale. Since "30% profit" is ambiguous phrasing that could mean either, always be explicit about which calculation you're using, especially when communicating a pricing target to someone else on your team or a supplier.
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Frequently Asked Questions
What's the difference between markup and margin?
Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price. Same dollar profit, different denominator — which means the same percentage number means something different depending on which one you're using.
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $20 cost item gives a $30 price (33% margin). A 50% margin on the same $20 cost item requires a $40 price (50% markup would only be $30). They diverge more as the percentage gets higher.
Which one should I use when pricing?
Margin is usually more useful for business planning since it directly tells you what percentage of revenue is profit. Markup is more common in retail/wholesale conversations. Know which one a supplier or partner means when they quote a percentage.