Markup Calculator
A 50% markup is a 33% margin. They are not the same number, and confusing them is the most expensive arithmetic mistake in commerce.
Selling price
$60.00
- Selling price
- $60.00
- Profit
- $20.00
- Markup
- 50.00%
- Margin
- 33.33%
- Price for a 50% MARGIN
- $80.00
- A 50% markup is a 33.3% margin. They are not the same number and confusing them is the most expensive arithmetic mistake in retail — markup is profit over cost, margin is profit over the selling price.
- The gap widens as the numbers climb. A 50% markup is a 33% margin; a 100% markup is a 50% margin; a 300% markup is a 75% margin. Margin can never reach 100% and markup has no ceiling at all.
- If a supplier quotes you a margin and you apply it as a markup, you undercharge. The last figure above is the price the same percentage would give as a margin.
About markup and margin
Markup is profit measured against the cost. Margin is profit measured against the selling price. Same profit, different denominator, and the gap between the two numbers widens as they climb.
Buy at $40 and add 50% markup and you sell at $60 for $20 profit. That $20 is half the cost, so a 50% markup — and a third of the price, so a 33.3% margin. If a supplier tells you the category runs at a 50% margin and you apply 50% as a markup, you price at $60 instead of $80 and give away a quarter of your revenue.
The relationship is worth knowing by heart at a few points. A 25% markup is a 20% margin. 50% markup is 33% margin. 100% markup is 50% margin. 300% markup is 75% margin. Margin can never reach 100% — you would have to sell at an infinite price — while markup has no ceiling at all.
Which one you should work in depends on who you are talking to. Retail and wholesale usually quote markup, because it is applied to a cost you already know. Accounts and investors work in margin, because it is a percentage of revenue and comparable across businesses. Being fluent in both, and knowing which you are being quoted, is the actual skill.
What it works out
- Selling price from cost and markup
- The margin that markup produces
- The price the same percentage would give as a margin
- Profit per unit
The formula
Price = Cost × (1 + Markup) Margin = Profit ÷ Price Markup = Profit ÷ Cost
$40 with 50% markup is $40 × 1.5, which is $60. The profit is $20.
Now measure that $20 two ways. Against the $40 cost it is 50% — the markup. Against the $60 price it is 33.3% — the margin. Nothing about the transaction changed; only the denominator did.
Converting between them: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). At 50% markup that gives 0.5 ÷ 1.5 = 33.3% margin, and working back, 0.333 ÷ 0.667 = 50% markup.
The asymmetry is why margin has a ceiling and markup does not. As margin approaches 100%, the markup required approaches infinity — because a 100% margin means the cost is zero.
To hit a target margin, divide the cost by one minus it. A 50% margin on $40 needs a price of $40 ÷ 0.5, which is $80 — not the $60 a 50% markup gives.
- Cost
- What you pay for the item, including anything to get it saleable.
- Markup
- Profit as a percentage of cost. What you add on.
- Margin
- Profit as a percentage of the selling price. What you keep.
A worked example
An item costing $40, marked up 50%.
That works out to $60.00 .
- Selling price
- $60.00
- Profit
- $20.00
- Markup
- 50.00%
- Margin
- 33.33%
- Price for a 50% MARGIN
- $80.00
Questions
What is the difference between markup and margin?
The denominator. Markup is profit over cost; margin is profit over the selling price. On a $40 item sold at $60, the $20 profit is a 50% markup and a 33.3% margin.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup is 0.5 ÷ 1.5, which is 33.3%. Going back the other way, markup = margin ÷ (1 − margin).
What markup do I need for a 50% margin?
100%. To keep half the selling price you have to double the cost. This is the conversion that catches people out most often, because doubling feels like a lot more than "half".
Can margin be more than 100%?
No. Margin is a share of the selling price, so 100% would mean the item cost you nothing. Markup has no ceiling — a $1 item sold at $100 is a 9,900% markup and a 99% margin.
Which should I use in my business?
Both, knowing which is which. Retail and wholesale quote markup because it applies to a known cost. Accounts and investors use margin because it is comparable across businesses. The danger is only in mixing them up.
What is a typical markup?
It varies enormously by industry — grocery runs thin, jewellery runs wide, software has almost no unit cost at all. Any published average is close to meaningless outside its own sector, which is why nothing is quoted here.
Does markup cover my overheads?
Only if you set it to. Markup covers the gap between what you paid and what you sold for; rent, wages and everything else come out of the total of all those gaps. The break-even calculator is the one that answers that question.