Markup vs profit margin: the difference in one line
Markup is how much you add on top of your cost. Profit margin is how much of the selling price you keep as profit. Both use the same profit figure, but markup divides it by cost and margin divides it by price. That is why a 50% markup gives only a 33.3% margin, and why mixing the two up is one of the most common pricing mistakes small sellers make.
Markup percentage = (selling price − cost) ÷ cost × 100. Profit margin percentage = (selling price − cost) ÷ selling price × 100. Selling price from a markup = cost × (1 + markup %). Selling price from a margin = cost ÷ (1 − margin %).
How to use this markup and margin calculator
Enter your cost per item and choose what you already know. If you know the markup you want, the calculator gives you the selling price and the margin. If you know the margin you are aiming for, it works out the price and the markup. If you already have a price, it shows the markup and margin that price produces. You can also enter how many units you sell to see total revenue and profit.
Markup to margin conversion chart
A 25% markup is a 20% margin. A 33.3% markup is a 25% margin. A 50% markup is a 33.3% margin. A 100% markup is a 50% margin. A 150% markup is a 60% margin. A 200% markup is a 66.7% margin, and a 300% markup is a 75% margin. Going the other way, a 30% margin needs a 42.9% markup, a 40% margin needs a 66.7% markup and a 50% margin needs a 100% markup. A margin can never reach 100%, but a markup can be any size.
Which should you use to price products?
Many retailers and resellers think in markup because it is easy: double the cost, or add 50%. Accountants, marketplaces and investors usually think in margin, because it shows how much of each sale is profit. If you want to hit a target margin, price from margin. If you follow a simple rule such as keystone pricing (a 100% markup), use markup. Just never compare a markup figure with a margin figure.
Whichever you pick, remember that your margin on paper is not what you keep. eBay, Etsy, Amazon and payment processors take a share of every sale, and shipping and ads cost money as well. Use this calculator to set a starting price, then check it with our eBay fee calculator, Etsy fee calculator or PayPal fee calculator to see the profit that is left.
Worked example
A reseller buys a jacket for $40 and wants a 50% markup. The selling price is $40 × 1.5 = $60. The profit is $20. The markup is $20 ÷ $40 = 50%, but the margin is $20 ÷ $60 = 33.3%. If the same reseller wanted a 50% margin instead, the price would have to be $40 ÷ (1 − 0.5) = $80, which is a 100% markup. After a 13.6% eBay fee on an $80 sale (about $11) and shipping, the real profit is lower again, so build fees into the price.