Profit Margin Calculator · Practical guide
The Difference Between Margin and Markup
Same profit, two denominators: margin divides by the selling price, markup divides by the cost.
At a glance
The Direct Answer
Margin is profit divided by revenue. Markup is profit divided by cost. Take an item that costs $50 and sells for $80: the profit is $30, the margin is 30 / 80 = 37.5%, and the markup is 30 / 50 = 60%. One sale, two very different percentages — which is why mixing them up wrecks pricing decisions.
Interactive tool
Profit Margin Calculator
Enter your own values, then compare the result with the examples below.
Profit Analysis
The Formulas Side by Side
- Margin % = (Revenue - Cost) / Revenue x 100
- Markup % = (Revenue - Cost) / Cost x 100
Because revenue is always larger than cost on a profitable sale, markup is always the bigger number. Margin can approach 100% but never reach it; markup has no ceiling.
Markup to Margin Conversion
| Markup | Margin |
|---|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
The conversion formula: margin = markup / (1 + markup). So a 50% markup is 0.5 / 1.5 = 33.3% margin.
Which One Should You Use?
Use markup when setting prices from cost — "I pay $50 and want a 60% markup, so I charge $80." Use margin when analyzing profitability after the sale — "37.5 cents of every revenue dollar was gross profit." The calculator above accepts either one: enter cost plus markup, or cost plus margin, and it solves for everything else.
Frequently Asked Questions
Which is bigger, margin or markup?
For any profitable sale, markup is always the larger percentage because it divides profit by the smaller number (cost). A 60% markup equals a 37.5% margin.
Can margin be more than 100%?
No. Margin is profit divided by revenue, and profit can never exceed revenue, so margin stays below 100%. Markup, by contrast, can be any size.
Which metric should I use for pricing?
Markup is the natural choice for setting prices from cost. Margin is better for analyzing profitability after sales are made. Both describe the same transaction.
What margin does a 50% markup give?
A 50% markup equals a 33.3% margin. Use margin = markup / (1 + markup): 0.5 / 1.5 = 0.333.