Markup vs. Margin Calculator

What Is the Difference Between Markup and Margin?

Markup and margin both measure the relationship between cost and price, but they use different denominators and produce different percentages. Confusing the two is one of the most common and costly pricing mistakes in business.

Markup is calculated as a percentage of cost. If something costs $100 and you mark it up 25%, you sell it for $125.

Margin is calculated as a percentage of the selling price. If something costs $100 and sells for $125, your margin is 20% — not 25%.

Same numbers, different percentages. A business owner who targets a 25% margin but prices using a 25% markup is leaving money on the table on every single transaction.

The Formulas

Markup % = (Price - Cost) / Cost x 100

Margin % = (Price - Cost) / Price x 100

To convert between the two:

Margin % = Markup % / (1 + Markup %)

Markup % = Margin % / (1 - Margin %)

A Worked Example

A painting contractor buys materials for a job that cost $4,200. He wants to make a 30% margin on materials.

If he applies a 30% markup instead:

• Selling price = $4,200 x 1.30 = $5,460

• Actual margin = ($5,460 - $4,200) / $5,460 = 23.1%

He wanted 30% margin. He got 23.1%. On a $4,200 material cost that's a $372 shortfall on margin — just on one job's materials.

To actually achieve 30% margin he needs to divide by (1 - 0.30):

• Selling price = $4,200 / 0.70 = $6,000

• Margin check = ($6,000 - $4,200) / $6,000 = 30.0% ✓