Margin & Markup Calculator
Calculate profit margin, markup, cost, and selling price. See the relationship between margin and markup instantly.
Margin vs. Markup: What Is the Difference?
Margin is profit expressed as a percentage of the selling price. Markup is profit expressed as a percentage of the cost. They describe the same profit from two different perspectives, and confusing them is one of the most common pricing mistakes in business.
Margin = (Selling Price - Cost) / Selling Price x 100
Markup = (Selling Price - Cost) / Cost x 100
A product that costs $60 and sells for $100 has a profit of $40. The margin is 40/100 = 40%. The markup is 40/60 = 66.7%. Same dollar profit, very different percentages.
Why It Matters for Pricing
If you want a 50% margin, you cannot simply add 50% to your cost. A $100 product marked up by 50% sells for $150, giving you a profit of $50 on a $150 sale, which is only a 33.3% margin. To achieve a 50% margin, you need a 100% markup (selling at double your cost). This distinction catches many small business owners off guard.
Common Margin Benchmarks by Industry
Margins vary enormously by industry. Grocery stores typically operate on 1-3% net profit margins. Restaurants target 60-70% gross margin on food items. Retail clothing often runs 50-60% gross margin. Software and SaaS companies can achieve 70-90% gross margins. Professional services like consulting often have 30-50% net margins. Knowing your industry benchmark helps you set competitive prices.
How to Set Prices Using Margin
If you know your cost and your target margin, the selling price formula is: Selling Price = Cost / (1 - Margin/100). For example, if your cost is $30 and you want a 40% margin: $30 / (1 - 0.40) = $30 / 0.60 = $50. Your selling price should be $50.
Margin Calculator FAQ
What is a good profit margin?
It depends entirely on the industry. A 5% net margin is excellent for a grocery store but poor for a software company. Compare your margins to industry benchmarks rather than an absolute standard. In general, gross margins above 50% give you more room to cover operating expenses.
Is margin or markup more commonly used?
Margin is more commonly used in financial reporting and business analysis because it relates profit to revenue. Markup is more commonly used in retail pricing and wholesale because it relates profit to cost. Both describe the same profit; the choice depends on context.
How do I convert margin to markup?
Markup = Margin / (1 - Margin). For example, a 40% margin equals a 66.7% markup: 0.40 / (1 - 0.40) = 0.40 / 0.60 = 0.667 = 66.7%. Use the converter tab above for instant conversion.
What is gross margin vs. net margin?
Gross margin only subtracts the direct cost of goods sold (COGS) from revenue. Net margin subtracts all expenses, including operating costs, interest, and taxes. Gross margin shows how efficiently you produce or source products. Net margin shows your overall profitability after all costs.
Can margin ever be more than 100%?
No. Margin is profit divided by selling price, so it can never exceed 100% (which would mean the product costs nothing). Markup, however, can exceed 100% and often does. A product that costs $10 and sells for $30 has a 200% markup but only a 66.7% margin.