Markup is the amount added on top of cost, as a percentage of cost. Margin is the profit, as a percentage of the price. The same dollars give two different percentages.
An example
An item that costs $100 and sells for $130 has a 30% markup but only a 23% margin. To earn a 30% margin, it must sell for about $143.
Why it matters
Overhead, taxes and your own pay come out of margin. Owners who set prices with markup while budgeting with margin end up short every month.
Price from the margin you need
Decide the margin you need, then divide the cost by one minus that margin to get the price.
Our margin and markup calculator works it both ways.
This article is general information, not legal, tax or regulatory advice. Rules change; confirm current requirements with the responsible agency or a licensed professional.
