Margin vs Markup Calculator – Profit Formulas Explained

Introduction

"I want a 50% profit." Do you mean Margin or Markup? Confusing these two has bankrupted many businesses.

• Markup is added to cost to set price.
• Margin is the profit percentage of the selling price.

The Formulas

Markup Formula

Markup % = ((Price - Cost) / Cost) × 100

• You buy for .
• You sell for .
• Profit is .
• Markup: 50 / 100 = 50%

Margin Formula (Gross Margin)

Margin % = ((Price - Cost) / Price) × 100

• You buy for .
• You sell for .
• Profit is .
• Margin: 50 / 150 = 33.3%

Why It Matters

If you want a 50% Margin (keep 50 cents of every dollar sales), you cannot just markup by 50%.

To get 50% Margin:

• Cost:
• Price needs to be .
• Profit: .
• Margin: 100 / 200 = 50%.
• Markup required: 100%

Cheat Sheet: Markup vs. Margin

Markup	Equals	Margin
25%	→	20%
50%	→	33%
75%	→	43%
100%	→	50%
300%	→	75%

How to Set Price Based on Desired Margin

Formula: Price = Cost / (1 - Desired Margin %)

Example:

• Cost:
• Desired Margin: 40% (0.40)
• Price = 50 / (1 - 0.40)
• Price = 50 / 0.60
• Price = .33

FAQ

Q: Which should I use? A: Sales/Accounting uses Margin (profitability). Purchasing/Pricing often uses Markup (easier to add to cost). Just be clear which one you are talking about.

Q: Can I have 100% margin? A: Only if your cost is /bin/zsh. Otherwise, impossible. Ideally, limit approaches 100% but never reaches it. Markup can be infinite (e.g., luxury goods).

Conclusion

Don't underprice your products. Remember: Markup is always higher than Margin. If you want a 30% margin, you need a 43% markup.