Markup vs Margin Calculator
Understand the difference between markup and margin, and convert between them instantly.
| Markup % | Margin % | Price on $100 cost |
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This is the single most common financial confusion I see in small business owners. They set prices using markup math while thinking about profitability in margin terms, and then wonder why the numbers don't add up. A 50% markup is not a 50% margin. They're measuring the same profit dollar against different denominators.
Markup uses cost as the denominator. Margin uses revenue as the denominator. The same profit dollar produces different percentages depending on which you use. They are not interchangeable.
The core distinction
If a product costs $60 and sells for $100, the profit is $40. Markup = $40 / $60 = 66.7% (profit as % of cost). Margin = $40 / $100 = 40% (profit as % of revenue). Same $40 profit. Same product. Completely different percentages. Confusing them produces pricing errors where you think you're operating at 50% margin when you're actually at 33%.
Converting between the two
Markup to margin: Margin = Markup / (1 + Markup). A 50% markup → 50 / 150 = 33.3% margin. Margin to markup: Markup = Margin / (1 - Margin). A 50% margin → 50 / 50 = 100% markup. These formulas are what the converter section above handles, use them when someone quotes you one metric and you need the other.
Which to use for pricing
If your target is a gross margin percentage (which is how most financial reporting and benchmarking works), price from margin: Price = Cost / (1 − Margin). To achieve a 40% margin on a $60 cost: $60 / 0.60 = $100. If you use markup instead by mistake, $60 × 1.40 = $84, you end up with only a 28.6% margin, not 40%. The division formula for margin-based pricing is the one to memorize.
Industry markup conventions
Different industries traditionally quote pricing using markup rather than margin, retail fashion often runs on "keystone" markup (100% markup, 50% margin). Restaurants quote food cost percentage (the inverse of margin). Contractors quote markup over materials and labor. Knowing which convention your industry uses prevents miscommunication when negotiating with suppliers or comparing to benchmarks.
Frequently asked questions
What's a "keystone" markup?
Keystone markup is exactly 100%, doubling the cost to set the retail price. A product that costs $25 retails for $50. This produces a 50% gross margin. It's the traditional retail benchmark, easy to calculate and a common starting point for pricing decisions.
Can margin exceed 100%?
No. Margin is profit as a percentage of revenue, and profit can't exceed revenue. A 100% margin would mean zero cost, theoretically possible for some digital products but practically unusual. Markup, however, can exceed 100%, a 200% markup means you charge three times cost.
Which is more useful for business analysis?
Margin, almost always. Financial statements report gross margin, net margin, and contribution margin, all expressed as percentages of revenue. Benchmarks, investor metrics, and lender covenants all use margin. Markup is useful for pricing calculations but margin is the language of business finance.