Margin vs markup — the key difference
- Margin is profit as a percentage of the selling price.
- Markup is profit as a percentage of the cost.
- A 50% margin is not the same as a 50% markup — confusing the two is one of the most common pricing mistakes.
The formulas
Margin: Profit ÷ Revenue × 100. So if cost is €40 and price is €100, margin is €60 ÷ €100 = 60%.
Markup: Profit ÷ Cost × 100. Same example: €60 ÷ €40 = 150% markup.
Typical margins by industry
What counts as a healthy margin varies a lot by industry — there's no single benchmark.
These are general ranges, not targets — a healthy margin depends on your specific costs, competition and pricing power.
Common margin mistakes
The most frequent one is setting a price using a markup percentage while thinking in margin terms — a 50% markup only produces a 33% margin, not 50%. The gap gets bigger at higher percentages, so always check which formula a target number actually refers to before pricing against it.
Why the gap matters more than it looks
On a single sale, mixing up margin and markup looks like a rounding error. Across a real sales volume, it isn't. If a product costs €100 and you price it assuming a 30% markup means "30% profit," you'd charge €130 — but that's actually only a 23% margin, not 30%. A 7-point gap on one sale is nothing. The same 7-point gap repeated across hundreds or thousands of sales a year is real money left on the table, and it's the same mistake every time, not a one-off.
A quick markup-to-margin reference
People often ask whether a round markup number maps to the same margin percentage — it never does, and the gap grows as the numbers get bigger. A 30% markup is a 23% margin, not 30%. A 50% markup is a 33% margin, not 50%. Even a 100% markup (doubling your cost) is only a 50% margin. If you've ever seen "30% markup" and "30% margin" used as if they were interchangeable in the same sentence, one of them is wrong.
Don't use the same margin for every product
A common pricing mistake, especially for anyone selling more than one product, is applying one flat margin across an entire catalog regardless of how each item actually sells. A slow-moving item usually needs a higher margin to be worth carrying at all; a high-volume item can often afford a thinner margin because the sales volume makes up for it. Pricing everything the same way, rather than per product, tends to quietly under-price the things that are actually in demand and over-price the things that aren't moving anyway.