Margin vs Markup Calculator

Margin (or profit margin) is profit expressed as a percentage of revenue. Markup is profit expressed as a percentage of cost. For the same product, the markup percentage will always be higher than the margin percentage. For example, a 50% markup corresponds to only a 33.3% margin.

Profit margin is calculated as: Margin % = (Revenue − Cost) / Revenue × 100. For example, if your cost is $50 and your selling price is $80, your profit is $30 and your margin is 30 / 80 × 100 = 37.5%.

Markup % = (Revenue − Cost) / Cost × 100. Using the same example, $30 profit on a $50 cost gives a markup of 30 / 50 × 100 = 60%. Notice this is higher than the 37.5% margin on the same transaction.

You can convert margin to markup using: Markup = 1 / (1 − Margin) − 1 (where margin is expressed as a decimal). For instance, a 40% margin (0.40) gives a markup of 1 / 0.60 − 1 = 0.6667, or 66.67%.

A 5% profit margin on $1,000 revenue means your profit = $1,000 × 5 / 100 = $50. That would mean your cost was $950 and your markup on cost would be roughly 5.26%.

Some industries — especially retail and manufacturing — price products by adding a fixed percentage on top of cost (markup), because cost is the known starting point. Margin is more useful for evaluating overall profitability relative to sales revenue.

Only when profit is zero — i.e., when cost equals revenue, both margin and markup are 0%. Otherwise, markup will always exceed margin for any positive profit, because markup uses the smaller cost as its base while margin uses the larger revenue.

It depends heavily on the industry. Retail businesses often operate on margins of 5–20%, while software and service businesses can achieve 50–80%. Generally, a margin above 10% is considered healthy for most product-based businesses.