Markup vs. Margin: What's the Difference?
Markup and margin both describe the relationship between cost and selling price, but they use different denominators. Markup is based on cost; margin is based on selling price.
The basic formula
Markup = (Selling price − Cost) ÷ Cost × 100; Margin = (Selling price − Cost) ÷ Selling price × 100
A simple example
If an item costs $60 and sells for $100, the markup is 66.7% while the gross margin is 40%. The dollar profit is the same, but the percentages answer different questions.
Practical tips
Use markup when building a price from cost. Use margin when reviewing how much revenue remains as gross profit. Avoid treating the two percentages as interchangeable.
Put it into practice
Use the free SoloBizKit calculators to test your assumptions and compare different scenarios. Keep your inputs and assumptions up to date as your business changes.
This guide is for general educational purposes only and is not financial, legal, accounting or tax advice. Rules and circumstances vary by location.