Margin vs Markup: What’s the Difference?

Mixing up margin and markup is one of the most common — and expensive — pricing mistakes in small business. Both compare profit to price, but against different bases.

The definitions

Markup is profit as a percentage of cost: Markup = (Price − Cost) ÷ Cost × 100. Margin is profit as a percentage of selling price: Margin = (Price − Cost) ÷ Price × 100. Markup is always the bigger number for the same sale.

Example

You buy an item for Rs 700 and sell it for Rs 1,000. Profit is Rs 300. Markup = 300 ÷ 700 = 42.9%. Margin = 300 ÷ 1,000 = 30%. Same sale, two different percentages — because the base differs.

Quick conversion table

Markup 25% ≈ Margin 20% · Markup 50% ≈ Margin 33% · Markup 100% ≈ Margin 50% · Markup 300% ≈ Margin 75%.

Which should you use?

Use markup when setting a price from a known cost ("cost plus 40%"). Use margin when judging profitability or comparing with industry benchmarks, since financial statements and investors speak in margins. The danger: telling yourself "I need a 30% margin" and then adding 30% markup — that actually yields only a 23% margin, quietly underpricing every sale.

Check any price instantly with the free Profit Margin Calculator — enter cost and price to see profit, margin and markup together.