Markup vs Margin: Formulas and Conversion Chart

November 9, 2026 · 5 min read · By the PercentageIncrease.us team

Markup and margin both describe profit as a percentage, which is why they get confused. The difference is the denominator.

The two formulas

Markup = (Price − Cost) ÷ Cost
Margin = (Price − Cost) ÷ Price

Buy a lamp for $40 and sell it for $60. Profit is $20. Markup is $20 ÷ $40 = 50%. Margin is $20 ÷ $60 = 33.33%. Same sale, two very different numbers.

Why it matters

If you want a 50% margin but price with a 50% markup, you fall short by almost 17 points. On $100,000 of sales that is roughly $16,700 of expected profit that never shows up.

Converting between them

Margin = Markup ÷ (1 + Markup)
Markup = Margin ÷ (1 − Margin)

Which one should you use?

Retailers often set prices with markup because it starts from a known cost. Accountants and investors report margin because it compares to revenue. Use the profit margin calculator when you need the margin view.

A pricing example from start to finish

Say you run a small online shop and a phone case costs you $8 to make and ship. You want a 60% gross margin. Using the margin formula backward, the price is $8 ÷ (1 − 0.60) = $20. Check it: profit is $12, and $12 ÷ $20 is 60%. Measured on cost instead, that same $12 is a 150% markup.

Now imagine you had told a new employee to "add 60%" to cost. They would price the case at $8 × 1.6 = $12.80, which is only a 37.5% margin. Spelling out which number you mean saves real money.

Three mistakes to avoid

• Quoting a margin target but pricing with markup. This is the costly one shown above.
• Leaving out hidden costs. Payment fees, shipping, and returns all come out of your margin even if they are not part of the product cost.
• Comparing your markup with a competitor's margin. The two numbers are not on the same scale, so a 50% markup is not "the same" as a 50% margin.

If you want to work from cost, the markup calculator shows both figures side by side.