Markup vs Margin
The most expensive mistake in business: confusing these two numbers.
The Difference That Costs Businesses Millions
Markup = (Sell − Cost) ÷ Cost × 100 → percentage of the cost
Margin = (Sell − Cost) ÷ Sell × 100 → percentage of the selling price
A common fatal mistake: a business targets "20% profit" but applies a 20% markup instead of achieving a 20% margin. The result is only 16.67% profit on revenue — a significant shortfall that compounds across thousands of transactions.
Conversion Table
| Markup | = Margin | On $50 cost |
|---|---|---|
| 10% | 9.1% | Sell at $55.00 |
| 20% | 16.7% | Sell at $60.00 |
| 25% | 20.0% | Sell at $62.50 |
| 33.3% | 25.0% | Sell at $66.67 |
| 50% | 33.3% | Sell at $75.00 |
| 100% | 50.0% | Sell at $100.00 |
Notice: you need a 100% markup to achieve a 50% margin. A 25% markup gives only 20% margin. This gap catches many new business owners off guard.
Quick Conversion Formulas
Markup = Margin ÷ (1 − Margin)
Frequently Asked Questions
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