What is the difference between margin and markup?

Margin is profit as a percentage of the selling price, while markup is profit as a percentage of the cost. A 50% markup on a $100 cost gives a $150 selling price, but the margin is only 33.3% because $50 profit ÷ $150 revenue = 33.3%.

How do I calculate profit margin?

Profit Margin (%) = ((Selling Price − Cost) ÷ Selling Price) × 100. For example, if you sell an item for $200 that cost you $120, the margin is (($200 − $120) ÷ $200) × 100 = 40%.

Free Profit Margin Calculator

Cost Price

Selling Price

Profit

$0.00

Margin

Markup

Revenue

$0.00

Cost $0.00

+ Profit $0.00

= Selling Price $0.00

Cost vs Profit Breakdown

Cost 100%

Cost

Profit

Margin vs Markup — Your Numbers

Metric	Margin	Markup
Formula	Profit ÷ Revenue	Profit ÷ Cost
Percentage	0%	0%
Base amount	$0.00	$0.00
Interpretation	% of revenue kept	% added to cost

Common Margin ↔ Markup Conversions

Margin	Markup	Multiplier
10%	11.1%	×1.111
20%	25%	×1.25
25%	33.3%	×1.333
30%	42.9%	×1.429
33.3%	50%	×1.5
40%	66.7%	×1.667
50%	100%	×2.0
75%	300%	×4.0

Understanding Profit Margin, Markup, and Pricing Formulas

Profit margin is one of the most important metrics in business. Whether you are pricing a product for the first time, evaluating supplier quotes, or reviewing your company's financial health, understanding the relationship between cost, revenue, and profit is essential. This calculator lets you work in any direction — plug in two values and it computes the third, along with every related metric you need.

Profit Margin vs Markup: The Critical Difference

Margin and markup both describe the relationship between cost and profit, but they use different bases for the percentage calculation — and confusing the two is one of the most common pricing mistakes in business.

Profit margin expresses profit as a percentage of the selling price (revenue). The formula is:

Margin % = ((Selling Price − Cost) ÷ Selling Price) × 100

Markup expresses profit as a percentage of the cost. The formula is:

Markup % = ((Selling Price − Cost) ÷ Cost) × 100

Consider a product that costs $60 to make and sells for $100. The profit is $40. The margin is 40% ($40 ÷ $100), but the markup is 66.7% ($40 ÷ $60). Same dollar profit, very different percentages. Markup is always higher than or equal to margin for any profitable sale — and the gap widens as the profit increases. A 50% margin corresponds to a 100% markup, meaning you doubled your cost.

When to Use Each Metric

Margin is preferred for financial reporting, profit analysis, and comparing profitability across products or business units. Investors and analysts almost always discuss margin because it relates profit to revenue — the top-line number that determines how much of each dollar earned you actually keep.

Markup is more practical for day-to-day pricing decisions. If you know your cost and your target markup, you can compute the selling price directly: Selling Price = Cost × (1 + Markup% ÷ 100). Retailers, wholesalers, and procurement teams typically think in terms of markup when setting prices.

Gross Margin in Context

Gross profit margin measures profit after subtracting the direct cost of goods sold (COGS) but before operating expenses, taxes, and interest. It tells you how efficiently a company produces its goods or services. Healthy gross margins vary widely by industry: software companies may exceed 80%, while grocery stores typically operate at 25–30%. If your gross margin is shrinking over time, it signals rising production costs or pricing pressure that needs attention before it erodes net profitability.

Common Use Cases

E-commerce sellers — Calculate the margin on each SKU to ensure profitability after shipping, fees, and advertising costs are factored in.
Freelancers and consultants — Convert your hourly cost (salary, overhead, benefits) into a selling rate that delivers your target margin.
Retailers — Use markup to set shelf prices from wholesale cost, then verify margin to make sure the product meets company profitability targets.
Students and job seekers — Understand these formulas for accounting, finance, and MBA coursework or interviews.

Frequently Asked Questions

What is a good profit margin?

It depends entirely on your industry. Net profit margins of 10–20% are considered healthy for most businesses. Software and SaaS companies may achieve 60–80% gross margins, while restaurants and grocery stores operate on margins as thin as 3–9%. Compare your margin against industry benchmarks for a meaningful assessment.

Can profit margin exceed 100%?

No. Since margin is profit divided by revenue, and profit can never exceed revenue (it is a portion of it), margin is always below 100%. Markup, on the other hand, has no upper limit — a 400% markup is entirely possible.

Can profit margin be negative?

Yes. A negative margin means you are selling below cost. This might be intentional — loss leaders attract customers who then buy higher-margin items — or it could indicate a pricing problem that needs correction. This calculator will flag negative margins clearly when they occur.

How do I convert between margin and markup?

Markup% = Margin% ÷ (1 − Margin% ÷ 100), and Margin% = Markup% ÷ (1 + Markup% ÷ 100). The conversion table in the results above shows the most common equivalents at a glance.

Note: This calculator provides estimates for educational and planning purposes. Actual profitability depends on additional factors like operating expenses, taxes, returns, and volume discounts. Consult a financial professional for business decisions.

This profit margin calculator is free, runs entirely in your browser, and never sends your data to a server. Bookmark it for quick access whenever you need to price a product, evaluate a deal, or compare margin and markup on the fly.