The two formulas
Markup measures profit against the cost of the goods, so markup % = (price − cost) ÷ cost × 100. Margin measures profit against the selling price, so margin % = (price − cost) ÷ price × 100. Both start from the same profit figure; only the denominator changes. Cost sheets, wholesale quotes and supplier negotiations usually speak in markup. Profit and loss statements, business valuations and lenders speak in margin.
Converting between them
Margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). With markup expressed as a decimal (100% = 1.0): a 1.0 markup gives 1.0 ÷ 2.0 = 50% margin. A 0.5 margin gives 0.5 ÷ 0.5 = 100% markup. Note that margin can never reach 100% while markup is unbounded — a 400% markup is an 80% margin, and the curve flattens quickly.
Reference table
The same profit expressed both ways, with the price multiplier (price ÷ cost) that makes the relationship obvious:
- 20% markup = 16.7% margin = 1.20× cost
- 30% markup = 23.1% margin = 1.30× cost
- 50% markup = 33.3% margin = 1.50× cost
- 66.7% markup = 40% margin = 1.67× cost
- 100% markup (keystone) = 50% margin = 2.00× cost
- 150% markup = 60% margin = 2.50× cost
- 233% markup = 70% margin = 3.33× cost
The mistake that costs money
A seller wants a 50% margin, so they apply a 50% markup. On a $12.40 cost that gives $18.60 — a $6.20 profit and only a 33% margin. The shortfall is $3.10 per unit, and on 5,000 units a year it is $15,500 of margin that never appears. Run every price through a markup calculator that shows both percentages before you publish it.
Getting from margin to a price list
To price from a target margin: price = cost ÷ (1 − margin). A 60% margin needs cost ÷ 0.4, a 2.5× multiplier. Add landed cost first — supplier price plus freight, duty and handling — otherwise the margin you are pricing to is measured against a number that is 15–25% too low.
Where fees fit in
Neither markup nor margin accounts for marketplace fees, payment processing or advertising on its own. Those come off the price after the fact: a 15% referral fee on a 50% margin product leaves 35%, and $6 of ads on a $39.99 order takes another 15 points. Model the full order in a profit calculator before committing to a price.