Margin vs Markup

Convert your own figures

Enter a cost, then either a markup or a selling price. The result shows both percentages together.

Fill in the fields above and the answer appears here.

Profit—
Margin—
Markup—
Cost—
Revenue—

CostProfit

The working out is shown here once the calculator has enough information.

What is the difference between margin and markup?

Margin is profit as a share of what the customer paid. Markup is the same profit as a share of what you paid. One sale, one profit figure, two percentages that rarely match.

Take a bicycle helmet. It costs you £24 and you sell it for £40. The profit is £16 either way. Divide £16 by the £40 selling price and the margin is 40%. Divide £16 by the £24 cost and the markup is 66.67%. Nothing about the sale changed, only the number you divided by.

Because cost is always the smaller of the two on a profitable sale, markup is always the bigger percentage. That single fact explains most of the confusion. A supplier saying "we work on 50" and a buyer hearing "50" can be a £13 gap on a £40 item.

How do you convert margin to markup and back?

Two formulas, both using decimals rather than whole percentages.

Markup = Margin1 − Margin  so a 0.40 margin gives 0.400.60 = 0.6667 = 66.67% markup Margin = Markup1 + Markup  so a 0.6667 markup gives 0.66671.6667 = 0.40 = 40% margin
MarginMarkupSell a £30 cost atProfit
10% 11.11% £33.33 £3.33
15% 17.65% £35.29 £5.29
20% 25.00% £37.50 £7.50
25% 33.33% £40.00 £10.00
30% 42.86% £42.86 £12.86
35% 53.85% £46.16 £16.16
40% 66.67% £50.00 £20.00
45% 81.82% £54.55 £24.55
50% 100.00% £60.00 £30.00
60% 150.00% £75.00 £45.00
70% 233.33% £100.00 £70.00

Which one should you price with?

Price with markup, review with margin. Markup is the practical tool at the moment you set a price, because you already know the cost and you are adding to it. Margin is the reporting tool, because it lines up with your accounts, where revenue is the top line.

When markup is the natural language

Any trade that quotes from a materials list works in markup. Builders, printers, electrical contractors, catering suppliers. The cost comes first and a percentage goes on top of it. Our markup calculator is built for that direction.

When margin is the natural language

Retail buying teams, wholesalers negotiating terms, anybody reading a profit and loss account. Your accountant will ask for gross margin and will never once ask for markup. Our gross margin calculator speaks that language.

A habit worth forming: set the price with markup, then check the margin it produced before the price goes live. Takes seconds and catches the mistake below.

What does confusing the two actually cost?

Say you buy at £30 and you have been told to work on 40%.

  • Read as markup: £30 × 1.40 = £42.00. Profit £12, margin 28.57%.
  • Read as margin: £30 ÷ 0.60 = £50.00. Profit £20, margin 40%.

Eight pounds of profit per unit, which is 40% of what you expected, gone on one misread word. A thousand units and it is £8,000. A whole catalogue priced that way and it is the difference between a profitable year and one where you worked very hard for nothing.

It runs the other way too. A supplier quoting 40% markup while you assume 40% margin makes their price look better than it is, and you find out when the quarter closes rather than when you signed. Putting both figures through the all-in-one margin calculator before you agree anything removes the ambiguity, since it prints both percentages from the same pair of numbers.

Margin and markup questions

Is markup always higher than margin?
Yes, on any profitable sale. Markup divides by the smaller number, the cost, so it always produces the larger percentage. A 20% margin is a 25% markup, a 50% margin is a 100% markup.
How do I convert margin to markup?
Markup = Margin ÷ (1 − Margin), with both as decimals. A 40% margin becomes 0.4 ÷ 0.6 = 0.667, so a 66.67% markup.
How do I convert markup to margin?
Margin = Markup ÷ (1 + Markup). A 60% markup becomes 0.6 ÷ 1.6 = 0.375, so a 37.5% margin.
Which one do UK retailers actually use?
Retail buyers and finance teams talk in margin because it reconciles to the profit and loss account. Trade suppliers, builders and printers more often quote markup because they start from a cost. Expect both in the same conversation.
What is keystone pricing?
Doubling the cost, which is a 100% markup and a 50% margin. It is a rule of thumb in gift and fashion retail rather than a rule, and it breaks down as soon as carriage or returns are significant.

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