Pricing & Profit Engineering

Markup vs Margin Calculator

Convert between markup and margin percentages, calculate revenue, and lock in exact profit targets.

Cost Price (COGS) Product / unit cost
Target Margin Rate Desired profit share
Or Adjust By Direct Markup:
Markup: %
Calculated Selling Price & Revenue
$100.00 +$50.00 Profit
Profit Margin 50.00% % of Selling Price
Markup Rate 100.00% % on Cost Price
Gross Profit $50.00 Revenue - Cost
Cost Ratio 50.00% Cost share of price
Revenue Composition (100% of Selling Price) Cost: $50.00 | Profit: $50.00
Cost of Goods (50%) Gross Profit (50%)
Common Markup to Margin Equivalents:
15% Markup = 13.04% Margin
25% Markup = 20.00% Margin
50% Markup = 33.33% Margin
100% Markup = 50.00% Margin

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Financial & Pricing Guide

About the Markup vs Margin Calculator

While both markup and profit margin represent the profitability of selling a product or service, they use completely different base figures in their denominators. Misunderstanding the relationship between the two is one of the most common reasons why small businesses and online sellers accidentally price items at a loss.

1. Markup Formula (Cost-Based)

Markup % = [(Selling Price - Cost) ÷ Cost] × 100

Markup shows how much extra money you added on top of what you originally paid for the inventory item.

2. Profit Margin Formula (Revenue-Based)

Margin % = [(Selling Price - Cost) ÷ Selling Price] × 100

Margin shows the percentage of final revenue you retain as gross profit after paying for inventory.

The Golden Conversion Formulas

  • Convert Markup to Margin: Margin % = Markup ÷ (1 + Markup)
  • Convert Margin to Markup: Markup % = Margin ÷ (1 - Margin)
  • Price from Cost & Desired Margin: Selling Price = Cost ÷ (1 - Margin %)

Frequently Asked Questions

What is the main difference between markup and margin?

Markup is the percentage of profit added onto the cost price of goods. Profit margin is the percentage of profit retained from the final selling price. Because the selling price is always higher than the cost price, the markup percentage is always mathematically higher than the margin percentage for the same product.

How do I convert a 50% markup into profit margin?

Use the formula: Margin = Markup ÷ (1 + Markup).
For a 50% markup (0.50): 0.50 ÷ 1.50 = 0.3333 or 33.33% Profit Margin. If you buy an item for $100 and mark it up by 50% ($150), your profit is $50, which is exactly 33.33% of your $150 revenue.

How do I calculate selling price from cost and desired margin?

To make sure your target margin is preserved, use:
Selling Price = Cost Price ÷ (1 - Margin Rate)
For example, if your item costs $80 and you want a 20% margin: $80 ÷ (1 - 0.20) = $80 ÷ 0.80 = $100.00.

Can profit margin ever reach 100% or higher?

No. Profit margin is bounded below 100% because profit cannot exceed the total revenue earned unless the cost is zero (in which case it equals 100%). However, markup can easily exceed 100%, 200%, or 1000%. For instance, buying an item for $10 and selling it for $40 is a 300% markup, but a 75% profit margin.

Why do small businesses confuse markup with margin?

The confusion happens when owners believe adding a 25% markup gives them a 25% profit margin. If an item costs $100 and you mark it up by 25% ($125), your gross profit is $25, but your actual margin is only 20% ($25 ÷ $125). Over an entire year of sales, this 5% shortfall severely erodes net operating profits.