Business Resources
Margin vs Markup
Margin and markup describe the same gross profit from two different angles. Margin expresses profit as a share of the selling price. Markup expresses the same profit as a share of the cost.
A product that costs $40 and sells for $100 earns $60 of gross profit. That is a 60% margin and a 150% markup — one product, one profit, two very different-looking numbers.
Definitions
The Four Terms That Matter.
| Term | What it means | Where it is used |
|---|---|---|
| Cost | What you pay for one unit, ideally landed. | The denominator in markup. |
| Selling price | What the customer pays for one unit. | The denominator in margin. |
| Gross profit | Selling price minus cost. | The numerator in both calculations. |
| Gross margin % | Gross profit as a share of selling price. | Comparing profitability across products. |
| Markup % | Gross profit as a share of cost. | Setting a price from a known cost. |
Formulas
Both Formulas, Plus the Conversions.
(Price − Cost) ÷ Price × 100
Bounded by 100%. Use it to compare products and to sanity-check pricing.
Example: ($100 − $40) ÷ $100 = 60%.
(Price − Cost) ÷ Cost × 100
Unbounded. Use it to price up from a cost you already know.
Example: ($100 − $40) ÷ $40 = 150%.
Margin ÷ (100 − Margin) × 100
Converts an evaluation metric into a pricing rule.
Example: 40% margin → 66.67% markup.
Markup ÷ (100 + Markup) × 100
Converts a pricing rule into a comparable profitability figure.
Example: 50% markup → 33.33% margin.
Worked examples
The Same Product, Two Numbers.
| Cost | Selling price | Gross profit | Margin | Markup |
|---|---|---|---|---|
| $10.00 | $25.00 | $15.00 | 60.00% | 150.00% |
| $40.00 | $100.00 | $60.00 | 60.00% | 150.00% |
| $60.00 | $90.00 | $30.00 | 33.33% | 50.00% |
| $120.00 | $199.00 | $79.00 | 39.70% | 65.83% |
Converter
Convert Between Margin and Markup.
Results
- 40.00% margin equals
- 66.67% markup
- 50.00% markup equals
- 33.33% margin
Margin can never reach 100%; markup has no ceiling.
Pitfalls
Where Businesses Go Wrong.
Written and reviewed by the InstaMed Wholesale business team. Last reviewed September 2026. This is general business education, not legal, tax or financial advice.
FAQ
Common Questions.
What is the difference between margin and markup?
Both measure the same gross profit. Margin divides gross profit by the selling price; markup divides it by the cost. A product bought at $40 and sold at $100 carries a 60% margin and a 150% markup.
How do you convert markup to margin?
Margin % = markup % ÷ (100 + markup %) × 100. A 50% markup is a 33.33% margin.
How do you convert margin to markup?
Markup % = margin % ÷ (100 − margin %) × 100. A 40% margin is a 66.67% markup.
Can margin be more than 100%?
No. Margin is a share of the selling price, so it approaches but never reaches 100%. Markup has no upper limit.
Which one should a retailer use?
Use margin to evaluate and compare profitability, and markup to set prices from a known cost. Problems arise when the two are used interchangeably in the same conversation.
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