They sound interchangeable, they use the same dollar profit, and confusing them is one of the most expensive mistakes in pricing. Here’s the difference in plain English.
Markup is your profit as a percentage of what the item cost you. Margin is your profit as a percentage of what you soldit for. The profit in dollars is exactly the same — you’re just dividing it by a different number.
Markup
(Profit ÷ Cost) × 100
Margin
(Profit ÷ Sale price) × 100
Keep this handy when someone quotes you a markup and you need to know the real margin:
| Markup | Equivalent margin |
|---|---|
| 10% | 9.1% |
| 25% | 20.0% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
| 300% | 75.0% |
The formula behind the table: margin = markup ÷ (1 + markup), with the markup expressed as a decimal.
Use markupwhen you’re setting a price — it’s the natural way to add a percentage on top of a known cost. Use marginwhen you’re judging profitability, because margin tells you what share of each sale you actually keep, and it’s the number you can compare across products and against industry benchmarks.
The safest workflow is to decide the margin you need first, then back-calculate the markup that hits it. The profit margin calculator does this both ways in real time, so you never have to reach for the conversion formula by hand.
How to Calculate Profit Margin
The profit margin formula explained with step-by-step worked examples.
How to Price a Product
A step-by-step pricing method that protects your margin from day one.
What Is a Good Profit Margin?
Healthy margin benchmarks by industry and how to know where you stand.
How to Calculate Break-Even Point
The break-even formula, contribution margin, and how many units you must sell.
Cost of Goods Sold (COGS)
What counts as COGS, what doesn't, and the formula to calculate it.
Gross Profit vs Net Profit
The difference between the two, with a worked income-statement example.
Average Order Value (AOV)
The AOV formula, why it matters, and proven ways to increase it.
How Discounts Affect Profit Margin
Why a small discount cuts profit hard, and the extra volume needed to break even.
Contribution Margin
What contribution margin is, the formula, and how it drives break-even.
Fixed vs Variable Costs
The difference, why it matters for pricing, and how to classify your costs.
Keystone Pricing
The classic 2x markup rule — what it is, the margin it gives, and when to use it.
Retail vs Wholesale Pricing
How to price for both channels without eroding your retail margin.
How to Calculate ROI
The return on investment formula with worked examples for stock and ads.
How to Increase Profit Margin
Ten practical, tested ways to widen your margin without losing sales.
Profit Margin Calculator
Sale price, margin, markup, or cost — four modes for any scenario.
Etsy Profit Calculator
Net profit after Etsy listing, transaction, payment, and Offsite Ads fees.
Amazon FBA Profit Calculator
Net profit, margin and ROI after Amazon referral, fulfillment and storage fees.
eBay Profit Calculator
Net payout after eBay's final value fee, per-order charge and international fees.
Shopify Profit Calculator
Real profit per sale after Shopify payment processing, surcharges and plan share.
Margin is profit as a percentage of the sale price; markup is profit as a percentage of the cost. The dollar profit is identical — only the base you divide by changes. Because cost is always lower than the sale price, markup is always a bigger percentage than margin for the same product.
Margin = markup ÷ (1 + markup), using the markup as a decimal. For a 50% markup: 0.5 ÷ 1.5 = 0.333, or 33.3% margin. To go the other way, markup = margin ÷ (1 − margin).
Because the two percentages use different denominators. A $10 item marked up 50% sells for $15. The $5 profit is 50% of the $10 cost (markup) but only 33.3% of the $15 sale price (margin). Same $5, different base.
Price using markup (it's easier to apply to a cost), but always check the resulting margin, because margin is what determines whether the business survives. Many retailers set a target margin first, then back-calculate the markup needed to hit it.
Not necessarily. A very high markup can price you out of the market, while a modest markup on high volume can be more profitable overall. The right level depends on your industry, competition and costs — see our guide on good profit margins by industry.