Short answer
Margin = profit ÷ price; markup = profit ÷ cost; markup = margin ÷ (1 − margin) and margin = markup ÷ (1 + markup). A 40% margin is a 66.7% markup, and a 40% markup is only a 28.6% margin.
1. The difference
- Margin = (price − cost) ÷ price
- Markup = (price − cost) ÷ cost
The same sale gives a higher markup than margin, so the two must not be swapped. A product costing $100 sold at $150 has $50 of profit: a 33.3% margin and a 50% markup.
2. Converting between them
- Markup = margin ÷ (1 − margin)
- Margin = markup ÷ (1 + markup)
- Price from cost and margin = cost ÷ (1 − margin)
- Price from cost and markup = cost × (1 + markup)
3. Conversion chart
| Gross margin | Markup needed | Price on $100 cost |
|---|---|---|
| 10% | 11.11% | $111.11 |
| 20% | 25.00% | $125.00 |
| 25% | 33.33% | $133.33 |
| 33.3% | 50.00% | $150.00 |
| 40% | 66.67% | $166.67 |
| 50% | 100.00% | $200.00 |
| 60% | 150.00% | $250.00 |
| 75% | 300.00% | $400.00 |
4. The common mistake
Pricing a $100 item with a 40% markup gives $140 and a margin of 28.6%, not 40%. To earn a 40% margin the price must be $166.67, a 66.7% markup.
5. Which should you use?
Use margin when you think about how much of each sale you keep, and markup when you set a price from cost. Break-even and contribution margin work from price, so they line up with margin.
Convert your own numbers with the Markup & Margin Calculator, or find your break-even in the Break-Even Calculator.
6. Frequently asked questions
Is markup higher than margin?expand_more
Yes. For the same sale, markup is profit ÷ cost, which is smaller than price, so markup is always the larger percentage.
How do I convert margin to markup?expand_more
Markup = margin ÷ (1 − margin). A 40% margin is 0.40 ÷ 0.60 = 66.7%.
How do I convert markup to margin?expand_more
Margin = markup ÷ (1 + markup). A 50% markup is 0.50 ÷ 1.50 = 33.3%.
What markup gives a 50% margin?expand_more
A 100% markup: selling at double the cost.