Calculators guide

Profit Margin vs Markup: What's the Difference and How to Calculate Each

Updated 28 September 2026 · 3 min read

Margin and markup both describe profit, but they measure it against different numbers — and mixing them up is one of the most common pricing mistakes in small business. A 50% markup is only a 33% margin. The Profit Margin Calculator and Markup Calculator show both at once.

Open the free Profit Margin Calculator

The two formulas

Profit = selling price − cost
Gross margin = profit ÷ selling price × 100
Markup = profit ÷ cost × 100

Example: you buy a product for $60 and sell it for $100. Profit is $40. Margin is 40 ÷ 100 = 40%. Markup is 40 ÷ 60 = 66.7%. Same sale, two very different-looking numbers.

Markup to margin conversion table

Markup	Margin	Price for a $100 cost
20%	16.7%	$120
25%	20%	$125
33.3%	25%	$133.33
50%	33.3%	$150
66.7%	40%	$166.67
100%	50%	$200
150%	60%	$250

To convert yourself: margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin), using decimals (50% = 0.5).

How to price for a target margin

Divide the cost by (1 − the margin you want). For a 40% margin on a $60 cost: 60 ÷ 0.6 = $100. Adding 40% to the cost instead gives $84 — only a 28.6% margin. The Profit Margin Calculator can work backwards from a target margin to the price.

Discounts eat margin faster than you think

A 20% discount on that $100 item brings the price to $80 and halves the profit to $20 — the margin falls from 40% to 25%. Check the effect of a sale with the Discount Calculator, and use the Break-Even Calculator to see how many sales you need to cover fixed costs.

Margin and markup in a spreadsheet

With the cost in column A and the price in column B, these formulas work in Excel, Google Sheets and Numbers:

Profit: =B2-A2
Margin: =(B2-A2)/B2 — format the cell as a percentage
Markup: =(B2-A2)/A2
Price for a 40% margin: =A2/(1-0.4)

Remember the costs that aren't on the invoice

Gross margin only subtracts what the item itself cost. Shipping, packaging, payment fees, marketplace commission and returns all come out of that profit before you see it. A 40% gross margin can shrink to 15% or less once they're counted, so price with all of them in mind.

Frequently asked questions

Is a 50% markup the same as a 50% margin?

No. A 50% markup gives a 33.3% margin. You need a 100% markup — doubling the cost — to reach a 50% margin.

Which should I use, margin or markup?

Margin is what accountants and investors usually compare, because it shows what share of each sale you keep. Markup is handy for quick cost-plus pricing. Just be clear which one you mean.

What's the difference between gross margin and net margin?

Gross margin only subtracts the cost of the goods sold. Net margin subtracts every expense — rent, wages, marketing, fees and tax — so it's always lower and shows what the business really keeps.

How do I work out markup from margin?

Divide the margin by (1 − the margin), using decimals. A 25% margin is 0.25 ÷ 0.75 = a 33.3% markup.

Can margin be more than 100%?

No — margin can't exceed 100% because profit can't be more than the price. Markup can be any size: selling at three times cost is a 200% markup.

What is a good profit margin?

It varies widely by industry — supermarkets run on thin margins, while software and services are often much higher. Compare with businesses like yours rather than a single rule.