Markup to margin: the table to keep
You price an item at cost plus 50% and your accounts say the margin is 33.33%. Neither number is wrong. Markup measures the profit against the cost, margin measures the same profit against the selling price, so for any profitable sale the margin is the smaller figure. The margin calculator shows the margin and the markup for the same sale and writes out the working. This table takes a cost of 100 at common markups, and every row is one sale seen two ways:
| Markup on cost | Selling price | Profit | Margin on price |
|---|---|---|---|
| 10% | 110 | 10 | 9.09% |
| 20% | 120 | 20 | 16.67% |
| 25% | 125 | 25 | 20% |
| 30% | 130 | 30 | 23.08% |
| 40% | 140 | 40 | 28.57% |
| 50% | 150 | 50 | 33.33% |
| 75% | 175 | 75 | 42.86% |
| 100% | 200 | 100 | 50% |
| 150% | 250 | 150 | 60% |
| 200% | 300 | 200 | 66.67% |
| 300% | 400 | 300 | 75% |
Notice that doubling your cost (a 100% markup) is only a 50% margin. A margin can never reach 100%, because that would need a cost of zero, while a markup has no ceiling.
The two formulas
Both start from the profit, which is the selling price minus the cost. Only the number you divide by changes.
- Markup = (price − cost) ÷ cost × 100
- Margin = (price − cost) ÷ price × 100
Take a cost of 80 and a price of 100. The profit is 20, so the markup is 20 ÷ 80 = 25% and the margin is 20 ÷ 100 = 20%. If you set prices by adding a percentage to the cost, the markup calculator leads with that number and shows the margin that goes with it.
Worked example: a price from a cost of 60
Say an item costs 60 and you want a 40% margin. That means the cost is the other 60% of the price, so price = cost ÷ (1 − margin) = 60 ÷ 0.6 = 100. The profit is 40, which is 40% of 100. As a markup it is 40 ÷ 60 = 66.67%.
Now the common slip: multiplying the cost by 1.4 because the target was 40%. That is a 40% markup, and it lands somewhere else.
| Method | Price | Profit | Margin | Markup |
|---|---|---|---|---|
| Cost ÷ 0.6 (40% margin) | 100 | 40 | 40% | 66.67% |
| Cost × 1.4 (40% markup) | 84 | 24 | 28.57% | 40% |
The slip costs 16 on every item. Over 500 sales the plan was 40 × 500 = 20,000 of profit, the result is 24 × 500 = 12,000, and you are 8,000 short without any sale going wrong.
Converting one into the other
Write the percentages as decimals. Then margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). A 30% markup is 0.3 ÷ 1.3 = 23.08% margin. A 30% margin needs a markup of 0.3 ÷ 0.7 = 42.86%. For the margin you want, here is the markup to charge:
| Margin you want | Markup you need | Price for a cost of 100 |
|---|---|---|
| 10% | 11.11% | 111.11 |
| 20% | 25% | 125 |
| 25% | 33.33% | 133.33 |
| 30% | 42.86% | 142.86 |
| 40% | 66.67% | 166.67 |
| 50% | 100% | 200 |
| 60% | 150% | 250 |
| 70% | 233.33% | 333.33 |
| 75% | 300% | 400 |
Both rules come from one fact: with a 40% margin the profit is 40% of the price, so the cost is the other 60%, and the price is the cost divided by 0.6. It is the same divide-instead-of-add step as in percentage calculations explained, where a price of 60 after 25% off was 80, not 75.
Pricing mistakes that quietly cost money
- Using a margin target as a markup. For a 25% margin on a cost of 90 the price is 90 ÷ 0.75 = 120, a profit of 30. Multiplying by 1.25 gives 112.50, a profit of 22.50 and a margin of exactly 20%.
- Forgetting what a discount does to margin. With a cost of 60 and a price of 100 the margin is 40%. Take 10% off and the price is 90, the profit 30 and the margin 33.33%. The profit per sale fell by a quarter, so you need 40 ÷ 30 = 1.33 times as many sales to earn the same total. A discount equal to the margin (40% off, a price of 60) leaves no profit at all. The discount calculator shows the price after any discount and after a coupon on top.
- Measuring on a price that includes tax. A shelf price of 120 includes tax at an example rate of 20%, so the sale is worth 100. With a cost of 80 the margin is 20 ÷ 100 = 20%. Using 120 gives 40 ÷ 120 = 33.33%, which overstates it. Take the tax out first with the VAT calculator, using the rate that applies to you.
- Leaving out costs that grow with the price. A cost of 80 and a price of 100 is a 20% margin. A payment fee of 3% of the price (an example, not a rate you will pay) takes 3 more, so the profit is 17 and the margin 17%.
- Comparing prices in different units. A supplier charges 4.00 a pound and you sell by the kilogram at 10.00. Setting 4.00 against 10.00 suggests a 60% margin. A kilogram is 2.2046 pounds, so the cost is 4.00 ÷ 0.45359237 = 8.82 a kilogram and the margin is about 11.8%. Convert first, as in metric to imperial conversions.
- Adding markups when they multiply. A cost of 50 plus 40% is 70, and the shop's 50% on top makes 105. Against the original 50 that is a 110% markup, not 90%. Each seller's own margin is taken on its own price: 20 ÷ 70 = 28.57% for the wholesaler and 35 ÷ 105 = 33.33% for the shop.
What margin does not tell you
The calculators here give gross margin: the profit left after the direct cost of the item, before rent, wages, marketing and tax. Net margin takes all of those off as well, so it is smaller, and it needs your own accounts.
To see whether a margin covers your overheads, use the break-even calculator. With a price of 25 and a variable cost of 10, each unit contributes 15, which is a 60% margin and a 150% markup on that cost. With fixed costs of 3,000 you need 3,000 ÷ 15 = 200 units, or 5,000 of sales, before the first unit of profit.
In a spreadsheet, with the cost in A2 and the price in B2, =(B2-A2)/B2 is the margin and =(B2-A2)/A2 is the markup. If your supplier's price list arrives as a CSV, convert it to Excel first so that codes with leading zeros survive. These are methods and worked examples, not advice on what to charge.