Margin vs Markup: What's the Difference?
Margin and markup describe the same profit in two different ways, and confusing them is one of the most common pricing mistakes. The difference is the base you divide by: margin uses the selling price, markup uses the cost.
Margin
Profit as a percentage of the selling price.
margin % = (price − cost) ÷ price × 100Markup
Profit as a percentage of the cost.
markup % = (price − cost) ÷ cost × 100Side by side
| Margin | Markup | |
|---|---|---|
| Base for the percentage | Selling price | Cost |
| Formula | (price − cost) ÷ price × 100 | (price − cost) ÷ cost × 100 |
| Example: cost 500, price 750 | 33.3% margin | 50% markup |
| Can it exceed 100%? | No — always under 100% | Yes — any value above 0% |
| What it tells you | Share of each sale you keep | How much you added on cost |
Worked example
Inputs: Cost price 500, selling price 750
Margin: 33.3%
Markup: 50%
The same 250 of profit is 33.3% of the price but 50% of the cost. Neither is wrong — they just answer different questions.
When to use Margin
Use margin when you're thinking about profitability — pricing a product, reviewing your P&L, or comparing lines where the selling price is the common base.
When to use Markup
Use markup when you're building a price from a cost, the classic cost-plus approach: start with what the item costs and add a percentage to reach a price.
The short answer
They describe one number, so pick the base that matches the decision. Reason in margin because that's what your profit and loss statement uses, but set prices in markup.
Run the numbers
Frequently asked questions
Quick answers before you start.
Is a 50% markup the same as a 50% margin?
No. On a cost of 500, a 50% markup gives a price of 750 — which is only a 33.3% margin. To hit a 50% margin you'd need a price of 1,000, which is a 100% markup.
Which is always bigger, margin or markup?
Markup, for any profitable sale. It divides by the smaller base (cost), so the same profit is a larger percentage than margin, which divides by the larger base (price).
Which one should I use to set prices?
Set the price with markup and review it with margin. Markup tells you what to add on cost; margin tells you whether the result is actually profitable.