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.
Frequently asked questions
What is a good profit margin?
It varies by industry. Retail typically runs 20-50%. Software and digital products can exceed 70%. Services often target 50-70%.
Why do margin and markup give different numbers?
Because they use different bases. Margin divides by price; markup divides by cost. A 50% markup equals a 33% margin.
How do I set prices using margin?
Use the formula: Price = Cost ÷ (1 - desired margin). For a 60% margin on a €40 cost: €40 ÷ 0.40 = €100.