Business guide
Profit Margin vs Markup
Compare profit margin and markup formulas, convert between the percentages, and avoid common pricing mistakes.
Margin and markup use different bases
Profit margin measures profit as a percentage of revenue: profit ÷ revenue × 100. Markup measures profit as a percentage of cost: profit ÷ cost × 100. Because the denominators differ, the percentages are not interchangeable.
One price, two percentages
An item costs $60.00 and receives a 50% markup. The Markup Calculator produces a $90.00 selling price and $30.00 gross profit. The Profit Margin Calculator divides that profit by revenue, producing a 33.33% margin.
| Metric | Formula | Example |
|---|---|---|
| Markup | Profit ÷ cost | $30 ÷ $60 = 50% |
| Margin | Profit ÷ revenue | $30 ÷ $90 = 33.33% |
Converting between the percentages
When both the input and output are percentage values, not decimal fractions, use these formulas:
- Margin (%) = 100 × Markup (%) / (100 + Markup (%))
- Markup (%) = 100 × Margin (%) / (100 − Margin (%))
A 50% markup becomes approximately 33.33% margin; a 50% margin requires a 100% markup.
When each metric helps
Markup is convenient when building a price from cost. Margin shows how much revenue remains as gross profit. Both become incomplete when cost omits labor, overhead, transaction fees, returns, taxes, or other expenses. ROI is a different comparison against an initial investment; see How ROI Is Calculated or the ROI Calculator.