Margin vs Markup

A 50% markup is not a 50% margin. Turn a cost into a selling price with a markup or a margin, or find both from a price you already have — with VAT or sales tax on top if you like.

BusinessPricingRetail

Inputs

Input examples

Markup is the profit as a percentage of the cost; margin is the same profit as a percentage of the selling price. Prices here are without VAT or sales tax; fill in a tax rate to see the price including tax. For education only — not financial advice.

Currency

Cost per unit c — what you pay, €

Markup — % on top of the cost

VAT / sales tax — optional, %

Margin or Markup?

Both describe the same profit, but measured against something different. A shirt bought for 60 and sold for 90 has a profit of 30: that is a markup of 30/60 = 50% on the cost, but a margin of only 30/90 = 33% of the price.

Shops often think in markups because they start from the purchase price; accountants and investors look at margins because they start from sales. Mixing them up is a classic way to price too low: a 50% margin needs a 100% markup.

margin= markup / (1 + markup)

markup= margin / (1 − margin)

50% margin= 100% markup

marginalways < 100%

Margin Against Markup

margin for each markup

margin = markup (only for tiny profits)

your price

Result

Enter the values above

Markup and Margin Side by Side

exact conversions

Markup	Margin	Price for a cost of 100
10%	9.09%	110
25%	20%	125
50%	33.3%	150
100%	50%	200
200%	66.7%	300

Worked Techniques

Price from a Markup

Add the markup percentage to the cost.

Example: cost 60, markup 50%: price 90, margin 33.3%.

Price from a Margin

Divide, don’t multiply: a 50% margin on a cost of 60 is not 90 but 120.

Example: cost 60, margin 50%: price 120, markup 100%.

Adding VAT

Tax is charged on the selling price and passed on to the government: it is not part of your margin.

Example: 90 + 21% VAT = 108.90.

Sources & Verification

References

P. W. Farris, N. T. Bendle, P. E. Pfeifer & D. J. Reibstein, Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd ed., Pearson, 2016 — Ch. 3 (Margins and Profits).