Reckonary / Finance / Markup vs margin
Markup vs margin: what's the difference?
They sound interchangeable, and mixing them up quietly eats into your profit. The same sale can be a 50% markup and a 33% margin at the same time — here is why, and how to switch between the two.
The one-sentence difference
Markup is your profit measured against what the item cost you. Margin is that same profit measured against what you sold it for. Same dollars of profit, two different bases — so they land on two different percentages, every time.
A worked example
You buy an item for $40 and sell it for $60. Your profit is $20 either way. As a markup, $20 over the $40 cost is 50%. As a margin, $20 over the $60 price is 33.3%. Nothing about the sale changed — only what you compared the profit to. That is the whole trick.
Markup-to-margin conversion table
Read across to turn any markup into the margin it really gives you. Notice the margin is always the smaller number, and the gap widens as the markup climbs.
| Markup | Margin |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 40% | 28.6% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
The formula, both directions
To turn a markup into a margin, divide the markup by one plus the markup: a 50% markup is 0.5 / 1.5 = 33%. To go the other way, divide the margin by one minus the margin: a 40% margin needs 0.4 / 0.6 = 67% markup. If you would rather not do it by hand, put your numbers into the margin calculator and read the markup off the result.
Which one should you use?
Price up from a supplier invoice with markup — it is the quick "add X%" you do on cost. Judge the health of a sale with margin, since it shows the share of each dollar you keep after the goods are paid for. Plenty of shops set their prices by markup and then report performance by margin, and that hand-off is exactly where the two get tangled. Pick the one that matches the question you are asking, and the numbers stop fighting you.
Put your own cost and markup in:
Open the markup calculator →Frequently asked questions
Why is the margin always smaller than the markup?
Because they divide the same profit by different numbers. Markup divides profit by the cost; margin divides it by the larger selling price. A bigger number on the bottom makes a smaller percentage, so the margin comes out lower every time.
Is a 100% markup the same as doubling the price?
Yes. A 100% markup adds the full cost back on top of itself, so a $40 item sells for $80. That same sale is a 50% margin, because the $40 of profit is half of the $80 price.
Can markup go above 100% but margin cannot?
Right. Markup has no ceiling — a $10 item sold for $50 is a 400% markup. Margin gets close to 100% but never reaches it, since your profit can never be more than the whole selling price.
Which one should I use to set my prices?
Use markup when you are pricing up from a supplier cost, because it works straight off the invoice. Use margin when you are judging how healthy a sale is, since it tells you the share of each dollar you actually keep.
Last reviewed July 2026. This guide is for education, not financial advice.