Quick answer: Margin and markup use the same profit but a different base. Margin = profit ÷ selling price. Markup = profit ÷ cost. An item that costs $60 and sells for $100 has a $40 profit, a 40% margin and a 66.67% markup. Margin can never reach 100%, but markup can be any size. Convert with margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin).
The two formulas side by side
| Margin | Markup | |
|---|---|---|
| Formula | (price − cost) ÷ price | (price − cost) ÷ cost |
| Base | Selling price | Cost |
| $60 cost, $100 price | 40% | 66.67% |
| Maximum | Below 100% | No upper limit |
| Used for | Profitability, financial statements | Setting prices from cost |
Work out both
Margin and markup
40% / 66.67%
Markup to margin conversion chart
Use this to check a pricing rule. A 50% markup only gives a 33.3% margin.
| Markup | Equivalent margin |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 25% | 20% |
| 30% | 23.1% |
| 33.3% | 25% |
| 40% | 28.6% |
| 50% | 33.3% |
| 60% | 37.5% |
| 75% | 42.9% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.7% |
| 300% | 75% |
Conversion formulas
margin = markup ÷ (1 + markup)markup = margin ÷ (1 − margin). Use decimals: 40% = 0.40.Convert a 40% target margin to a markup
- markup = 0.40 ÷ (1 − 0.40) = 0.40 ÷ 0.60 = 0.6667.
- So mark cost up by 66.67% to earn a 40% margin.
- On a $60 cost: $60 × 1.6667 = $100 selling price.
Result: 66.67% markup
Setting a price from a target margin
price = cost ÷ (1 − target margin)$45 cost at a 35% margin: $45 ÷ 0.65 = $69.23.A common mistake is multiplying cost by 1 + margin. $45 × 1.35 = $60.75 gives only a 25.9% margin, not 35%.
Why the difference matters
A retailer who confuses the two
- The owner wants a 30% margin and applies a 30% markup to a $70 cost: $70 × 1.30 = $91.
- Actual margin: ($91 − $70) ÷ $91 = 23.1%.
- On $500,000 of sales that is a gap of about $34,600 in gross profit compared with a true 30% margin.
Result: 23.1% margin, not 30%
Typical gross margins by business type
Gross margins vary widely, which is why comparing with your own history and sector matters more than a single benchmark. As rough orientation, grocery retail often runs on gross margins in the 20s, general retail and restaurants around 30 to 40% before labor and overheads, and software and digital products often above 70%. Check your industry association or public competitors’ filings for current figures.
Excel formulas
// Cost in A2, price in B2
// Margin
=(B2-A2)/B2
// Markup
=(B2-A2)/A2
// Price for a target margin in C2
=A2/(1-C2)
// Markup from a margin in C2
=C2/(1-C2)Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of cost. The same sale gives a higher markup than margin.
Is a 50% markup the same as a 50% margin?
No. A 50% markup equals a 33.3% margin. A 50% margin needs a 100% markup.
How do I convert markup to margin?
Divide the markup by 1 plus the markup, using decimals. A 25% markup is 0.25 ÷ 1.25 = 20% margin.
How do I convert margin to markup?
Divide the margin by 1 minus the margin. A 40% margin is 0.40 ÷ 0.60 = 66.67% markup.
How do I price a product for a 30% margin?
Divide the cost by 0.70. A $49 cost priced for a 30% margin is $70.
Can margin be over 100%?
No. Margin is a share of the price, so it is always below 100%. Markup can be any size.
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