Pricing
Margin vs markup
Vatly team · August 2026
Margin and markup both measure profit, but against different bases. Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. The same sale has a different number for each, and mixing them up quietly erodes your profit on every order.
The formulas
margin = (price minus cost) / price x 100
markup = (price minus cost) / cost x 100
Buy at 60.00, sell at 100.00: profit is 40.00. The margin is 40/100 = 40%. The markup is 40/60 = 66.7%. Same profit, two different percentages, both correct in their own context.
Why the confusion is expensive
The classic mistake is adding a markup percentage and calling it a margin. A 50% markup on cost is only a 33.3% margin. If your budget assumes 50% margin and your pricing actually delivers 33.3%, you are missing a sixth of your planned profit on every sale, permanently, and it rarely shows up until the year-end numbers.
The reverse mistake is setting prices with a margin formula but describing them as markup, which makes your prices higher than intended and can quietly push you out of the market.
Conversion table
| Markup on cost | Margin on price | Markup on cost | Margin on price |
|---|---|---|---|
| 10% | 9.1% | 60% | 37.5% |
| 20% | 16.7% | 66.7% | 40% |
| 25% | 20% | 80% | 44.4% |
| 33.3% | 25% | 100% | 50% |
| 40% | 28.6% | 150% | 60% |
| 50% | 33.3% | 200% | 66.7% |
Two rows are worth memorising: a 100% markup equals a 50% margin (keystone pricing, common in retail), and a 66.7% markup equals a 40% margin (a common service business target).
Which one should you use?
Use markup to set prices: it starts from cost, which you know. Use margin to manage the business: it tells you what share of every pound of revenue survives as profit, which is what lenders, budgets and comparisons across your own products care about.
The profit margin calculator shows both figures for every pair of prices, and the markup calculator works from cost and markup to the price, profit and margin. Between the two, the conversion is automatic.