Markup vs Margin: Pricing Explained
Markup and margin are both used to set prices, but they measure different things. Confusing them can cost you thousands per year.
What is markup?
Markup is the percentage added to your cost to determine selling price. If a project costs you $100 in time and you apply a 50% markup, you charge $150. Your profit is $50.
What is margin?
Margin is the percentage of the selling price that is profit. If you charge $150 and your cost was $100, your margin is 33.3% ($50 ÷ $150).
Why they're different
A 50% markup gives you 33.3% margin. A 50% margin requires 100% markup. The same percentage number produces very different selling prices depending on which one you're using.
Quick reference
| Markup | Margin | Selling price (on $100 cost) |
|---|---|---|
| 25% | 20% | $125 |
| 50% | 33.3% | $150 |
| 100% | 50% | $200 |
| 200% | 66.7% | $300 |
The conversion formulas
- Margin from markup: margin = markup ÷ (1 + markup)
- Markup from margin: markup = margin ÷ (1 - margin)
Use our Markup vs Margin Calculator to see the exact difference for your numbers.
Which should you use?
If you're tracking profitability, use margin — it shows what percentage of revenue is profit. If you're pricing projects from a cost basis, use markup — it's simpler to calculate. Most businesses track margin because it directly relates to revenue.