They use the same profit, but measure it against different things. Mixing them up quietly wrecks your pricing.
Both markup and margin describe the same profit on a sale — they just measure it against different bases. Markup is your profit as a percentage of cost. Margin is your profit as a percentage of the selling price.
Because the selling price is always larger than the cost, the margin percentage is always smaller than the markup percentage for the same product. That single fact is the source of most pricing mistakes.
Markup % = (Price − Cost) ÷ Cost × 100
Margin % = (Price − Cost) ÷ Price × 100
The numerator — your profit in dollars — is identical. Only the denominator changes.
Say a product costs you $60 and you sell it for $100. Your profit is $40.
Markup = $40 ÷ $60 = 66.7%. Margin = $40 ÷ $100 = 40%. Same $40 profit, two very different percentages.
| Markup | Equivalent Margin |
|---|---|
| 15% | 13.0% |
| 25% | 20.0% |
| 50% | 33.3% |
| 100% | 50.0% |
| 200% | 66.7% |
To convert markup to margin: margin = markup ÷ (1 + markup).
Use whichever your context expects, but be explicit. Retailers and suppliers often talk in markup; finance and reporting use margin. When you set a target, say which one you mean.
Rule of thumb: if someone quotes you a percentage without specifying, assume they might have the wrong one. A '40% markup' is only a 28.6% margin — a costly gap at scale.