Markup vs. margin calculator
Markup and margin describe the same profit dollar in two different ways, and mixing them up is one of the most common, most expensive pricing mistakes a business can make. This converts between them and solves for price directly.
Selling price
$60.00
Profit / unit
$20.00
Markup
50.0%
Margin
33.3%
A 50% markup on cost produces a 33.3% margin — not the same number, and the gap between them widens the higher the markup goes.
Markup and margin formulas
This is the standard business markup formula. How to calculate markup on any product: subtract cost from price to get the profit dollar, then divide by cost.
Same numerator (price minus cost, the profit dollar), divided by two different denominators. Markup divides by cost; margin divides by price. That single difference is the entire distinction, and it's also why the two percentages are never equal on a profitable sale.
A worked example
A product costs $60 to make and sells for $100, $40 in profit either way you slice it.
Markup: $40 ÷ $60 = 66.7%. Margin: $40 ÷ $100 = 40%. The same transaction, the same $40, and two percentages that differ by nearly 27 points. Neither is wrong, they're just answering different questions: "how much did I add on top of cost" versus "what share of the sale is profit."
The conversion table
A quick reference for converting between the two without running the formula each time.
| Margin | Equivalent markup | Markup | Equivalent margin |
|---|---|---|---|
| 10% | 11.1% | 10% | 9.1% |
| 15% | 17.6% | 25% | 20.0% |
| 20% | 25.0% | 50% | 33.3% |
| 25% | 33.3% | 75% | 42.9% |
| 30% | 42.9% | 100% | 50.0% |
| 40% | 66.7% | 150% | 60.0% |
| 50% | 100.0% | 200% | 66.7% |
| 60% | 150.0% | 300% | 75.0% |
Notice how much faster markup climbs than margin, a 60% margin needs a 150% markup (2.5x cost), while margin itself can never reach 100% on a real product, since that would mean cost is zero. For the full table extended out to 500% markup, with dollar examples and industry benchmarks, see the complete conversion chart guide.
Why markup is always higher than margin
It's pure arithmetic, not a pricing quirk: the same profit dollar divided by the smaller number (cost) always produces a larger percentage than the same dollar divided by the bigger number (price, which equals cost plus profit). The gap between the two widens as profit grows: at a thin 5% margin, markup is barely higher, around 5.3%. At a fat 80% margin, markup is 400%. This is also why comparing your markup against someone else's margin, a startlingly common error in casual conversation about pricing. Makes two businesses look far apart when they might be identically profitable.
The expensive mistake of confusing the two
A retailer wants a 30% margin on a product costing $70. Reaching for the wrong formula, they add 30% markup instead: $70 × 1.30 = $91. The actual margin on that $91 price is $21 ÷ $91 = 23.1%, not the 30% they intended, a shortfall of nearly 7 percentage points on every single sale.
Across $500,000 in annual revenue at that price point, the gap between a true 30% margin and the 23.1% margin actually delivered works out to roughly $34,600 in profit quietly left on the table, not from a bad pricing decision, but from using the markup formula when the margin formula was what the business actually meant.
"30% markup" and "30% margin" sound like the same instruction. They produce different prices every time.
Solving for price from a target margin
This is the formula the mistake above skips. A $70 cost with a genuine 30% margin target: Price = $70 ÷ (1 − 0.30) = $70 ÷ 0.70 = $100, not $91. Dividing by cost (the markup approach) undershoots a margin target every time; dividing by one minus the target margin is the version that actually hits it. The calculator above solves this directly. Switch to "I know cost & target margin" and it returns the correct price without the manual algebra.
Keystone pricing and other conventions
"Keystone pricing," doubling the wholesale cost to set retail price, is a long-standing retail convention, and it happens to be one of the few points where markup and margin are both easy to state at once: a 100% markup (double the cost) always produces exactly a 50% margin, regardless of the underlying dollar amounts. It's a reasonable starting point for a new retail product with no pricing history to work from, though most established retailers move away from a flat keystone rule once they have real data on what a specific product category can actually bear.
Typical markup and margin by industry
General conventions, not rules, the right number for a specific business depends on its actual cost structure and competitive position.
Grocery: commonly a 25-30% markup (roughly 20-23% margin), among the thinnest in retail, reflecting high volume and intense price competition.
Restaurants: food cost specifically is often marked up 200-300% (a 3-4x multiplier), though after labor, rent, and other costs are factored in, overall restaurant margins are usually much thinner than that food-cost multiplier alone suggests.
General retail: a 50-100% markup is typical, with keystone pricing (100% markup, 50% margin) as a common default before category-specific data refines it.
Software and digital products: routinely 300%+ markup, since marginal cost per additional customer is close to zero, this is the same dynamic covered in more depth on the contribution margin page's industry-range section.
Margin stacking through a supply chain
A product rarely moves from raw material to end customer through a single markup. Each intermediary in the chain applies its own, and the effect compounds rather than adds.
A manufacturer makes a product for $10 and sells it to a distributor at a 50% markup: $15. The distributor applies its own 40% markup selling to a retailer: $21. The retailer applies keystone pricing (a 100% markup) to reach the shelf price: $42. The end customer pays $42 for a product that cost $10 to make, a 320% cumulative markup. Far more than any single 50%, 40%, or 100% markup in isolation would suggest, because each markup is applied to an already-marked-up number, not back to the original $10.
This is why a retailer's wholesale cost, not the manufacturer's production cost, is the correct base for that retailer's own markup or margin calculation. Using the wrong cost figure anywhere in the chain either overstates or understates the margin that business actually captures.
Blended margin across a product mix
A business selling several products at different margins doesn't have one true margin, it has a blended figure that shifts with the sales mix, the same principle covered in more depth on the contribution margin page's weighted-average section. A shop selling 70% low-margin staples (20% margin) and 30% high-margin specialty items (60% margin) runs a blended margin of (0.70 × 20%) + (0.30 × 60%) = 32%, a figure that doesn't match either individual product and moves every time the mix between the two shifts, a marketing push toward the specialty items raises the blended margin without a single price changing.
Markup/margin vs. contribution margin
Margin, as defined on this page, and contribution margin ratio are the same calculation when the only cost being subtracted is true variable cost. They diverge from gross margin, the figure that shows up on an income statement, which subtracts full cost of goods sold, a number that can include some costs that don't scale cleanly with each unit sold the way pure variable cost does. For pricing a single product against its direct cost, the margin formula on this page is exactly right. For break-even and CVP math specifically, contribution margin (built from true variable cost) is the number that belongs in the formula.
Markup/margin and your break-even point
Every markup or margin decision on this page is also a break-even decision, since price and cost together determine contribution margin, and contribution margin is the denominator in the break-even formula. The $70-cost example above, correctly priced at $100 for a true 30% margin versus $91 from the markup mistake, carries a $30 contribution margin in the correct case and only $21 in the mistaken one, meaningfully changing how many units are needed to break even. Pricing errors from confusing markup and margin don't just cost profit per sale; they raise the break-even bar too.
Discounting and the markup/margin relationship
Because margin shrinks faster than markup when a discount is applied, a business that thinks in markup terms can badly underestimate how much a discount actually costs. The $70-cost, $100-price product from the mistake example above carries a 30% margin. A 10% discount brings the price to $90. Margin drops to ($90 − $70) ÷ $90 = 22.2%, a nearly 8-point margin decline from a discount that looked like "just 10%." This is the same mechanism explored in full, with the exact volume needed to break even on a discount like this, on the price change impact calculator.
Landed cost and maintained markup
Every formula on this page assumes the cost figure is correct, and the most common way it isn't is using the supplier invoice alone instead of landed cost: the invoice price plus shipping, import duties, and any other cost required to actually get the item onto the shelf. A product with a $10 supplier invoice and $2 in freight and duties has a $12 landed cost, not $10, and every markup or margin calculated against the wrong, lower number overstates real profitability from the start.
A second, separate gap shows up after pricing: the initial markup set when an item is first priced is rarely what actually gets realized once markdowns enter the picture. "Maintained markup" is the actual, blended figure across everything sold in a period, not just the original ticket price.
100 units at a $10 landed cost, initially priced at $20, a 100% markup, 50% margin. Half sell at that full price; the other half sell marked down to $15. Total revenue: (50 × $20) + (50 × $15) = $1,750 against $1,000 in total cost. Maintained markup: 75%. Maintained margin: 42.9%. Both meaningfully below the 100%/50% the item was originally priced to hit, purely from the markdowns that happened after the fact. The initial pricing decision was never wrong; the number that matters for actual profitability is the maintained figure, not the ticket-price figure.
A margin health check
Run through these before trusting a markup or margin figure.
A margin target used the margin formula (or the price-from-margin formula), not the markup formula.
Shipping, payment processing, and packaging are easy to leave out of the cost figure, inflating both markup and margin.
A 40% margin is not "less" than a 50% markup. They need converting to the same basis before comparing.
An industry convention is a starting point, not a substitute for pricing against real costs.
Common mistakes
The single most expensive mixup on this page. See the worked example above for exactly how much profit it costs.
Telling a supplier or partner "we run a 50% margin" when the actual figure is a 50% markup (a 33.3% margin) misrepresents the business's profitability by a wide margin, in both directions depending on which way the mixup runs.
Margin mathematically caps below 100%, since price always exceeds cost by a finite amount. Markup has no such ceiling, a business genuinely can run a 500% markup, but never a 100%+ margin.
An industry benchmark stated as a markup convention (like grocery's 25-30%) isn't directly comparable to a margin figure from an income statement without converting one to the other first.
Frequently asked questions
Subtract cost from price to get the profit dollar amount, then divide by cost: markup % = (price − cost) ÷ cost. A product costing $40 and selling for $60 has a $20 profit, a 50% markup ($20 ÷ $40).
Initial markup is set when an item is first priced. Maintained markup is the actual, blended markup realized across everything sold in a period, once markdowns and discounts are included, it's almost always lower than the initial figure, since markdowns pull it down after the fact without the original pricing decision having been wrong.
Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price. Same dollar profit, two different denominators, which is why a 50% markup and a 50% margin are never the same thing.
Yes, on any profitable sale. Markup divides profit by the smaller number (cost), margin divides it by the larger number (price). Dividing the same numerator by a smaller denominator always produces a bigger percentage. The two only converge as profit approaches zero.
A 100% markup (doubling the cost) produces exactly a 50% margin. This is the "keystone pricing" convention common in retail, and it's one of the few points where the relationship is intuitive rather than requiring the conversion formula.
Most likely because you actually needed a 30% margin, not a 30% markup, and used the wrong formula. A 30% markup only produces a 23.1% margin, on $100,000 in revenue, that's roughly $6,900 less gross profit than a true 30% margin would have delivered. See the section below on this exact mistake.
Closely related but not identical. Margin as defined on this page (profit ÷ price) matches the contribution margin ratio when the only cost subtracted is variable cost. Gross margin, reported on an income statement, subtracts full cost of goods sold, which can include some costs that don't scale with each unit the way pure variable cost does.
It varies enormously: grocery commonly runs a 25-30% markup, restaurants often 60-100% (a 3-4x multiplier on food cost specifically), general retail 50-100%, and software or digital products routinely 300%+ given near-zero marginal cost. These are conventions, not rules; the right number for a specific business still depends on its actual cost structure and competitive position.
Because margin shrinks faster than the discount percentage itself. A 10% price cut on a 30% margin product drops margin to roughly 22%, a much bigger relative decline. See the discounting section above for the full mechanics and math.
Each business in a supply chain applies its own markup to the price it paid, not back to the original manufacturing cost, so markups compound multiplicatively rather than adding together. A 50%, then 40%, then 100% markup applied in sequence produces far more than a 190% cumulative markup would suggest.
Weight each product's margin by its share of total units or revenue sold, then sum the results, the same weighted-average approach used for contribution margin across a product mix. See the blended margin section above for a worked example.
Calculate your own markup and margin above, free, or see the contribution margin and break-even point pages for the related numbers this page covers.