Guide · Updated November 2026 · How we check our numbers

Margin vs Markup: What's the Difference?

Margin and markup both describe profit on a sale, but they divide by different numbers. Confusing them is one of the most common pricing mistakes.

The formulas

Markup = (Price − Cost) ÷ Cost
Margin = (Price − Cost) ÷ Price

Worked example

A product costs $40 and sells for $60. Profit is $20.

Markup = 20 ÷ 40 = 50%
Margin = 20 ÷ 60 = 33.3%

Same sale, two very different percentages.

Converting between them

Margin = Markup ÷ (1 + Markup). Markup = Margin ÷ (1 − Margin). A 50% markup is a 33.3% margin; a 40% margin needs a 66.7% markup.

Why it matters

If you want a 40% margin but add a 40% markup, the price is cost × 1.4 — giving only a 28.6% margin. On $100,000 of sales, that is $11,400 less gross profit than planned.

Break-even and margin together

Your contribution per unit (price − variable cost) decides how many sales you need to cover fixed costs. With $10,000 of fixed costs, a $50 price and a $30 variable cost, you need 500 units to break even.

Try the calculators

💹 Profit Margin Calculator 🏷️ Markup Calculator ⚖️ Break-Even Calculator

This guide is general information, not professional advice.