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Markup vs Margin — Convert Between the Two
Markup and margin measure the same profit against two different bases, and confusing them silently under-prices your product. Markup is profit as a percentage of your cost (profit ÷ cost); margin is the same profit as a percentage of the selling price (profit ÷ price). Because the price is always bigger than the cost, the margin number is always smaller than the markup — a 50% markup is only a 33.3% margin. The exact conversions are margin = markup / (1 + markup) and markup = margin / (1 − margin). A seller who sets a "50% markup" thinking they have secured a "50% margin" has actually taken a 33.3% margin — a costly, perennial mistake. Enter any markup % (or margin %) to see its exact equivalent, both ways. Free, no login.
Definition: markup % = profit ÷ cost (profit measured against what the item costs you)
- Definition: margin % = profit ÷ price (the same profit measured against the selling price)
- Markup is always the larger number, because cost < price for the same profit
- Convert markup → margin: margin = markup / (1 + markup)
- Convert margin → markup: markup = margin / (1 − margin)
- Worked example — 50% markup → margin = 0.50 / 1.50 = 33.3% (the classic confusion)
- Worked example — 50% margin → markup = 0.50 / 0.50 = 100% (needs double the cost)
- Worked example — cost $80 sold at $100: profit $20 = 25% markup BUT only a 20% margin
- Guard: a margin can never reach 100% (price would be infinite); a markup can exceed 100%
Frequently asked questions
What is the difference between markup and margin?
They express the same profit against different bases. Markup is profit as a percentage of cost (profit ÷ cost); margin is profit as a percentage of the selling price (profit ÷ price). On a $80 item sold for $100, the $20 profit is a 25% markup (20 ÷ 80) but only a 20% margin (20 ÷ 100). Because the price is larger than the cost, the margin percentage is always smaller than the markup for the same sale. Treating a target markup as if it were the margin (or vice-versa) under-prices the product — which is exactly the error this converter is built to prevent.
How do I convert a markup percentage to a margin percentage?
Use margin = markup / (1 + markup). A 50% markup becomes 0.50 / 1.50 = 33.3% margin; a 100% markup becomes 1.00 / 2.00 = 50% margin. To go the other way, use markup = margin / (1 − margin): a 33.3% margin is 0.333 / 0.667 = 50% markup, and a 50% margin is 0.50 / 0.50 = 100% markup. A margin can approach but never reach 100% (that would require an infinite markup, since profit can never exceed the selling price), whereas markup has no upper bound.
Why is my margin lower than my markup?
Because the two are measured against different denominators. Markup divides the profit by the (smaller) cost, while margin divides the same profit by the (larger) selling price. Dividing by a larger number gives a smaller percentage, so the margin is always below the markup for the same transaction. This is why "add 50% to my cost" (a 50% markup) does not give you a 50% margin — it gives 33.3%. If you have a target margin in mind, use the reverse-pricing mode to get the exact price you need rather than guessing at a markup.