How to calculate markup and margin
Markup and margin describe the same profit on two different bases, and mixing them up is one of the most common pricing mistakes. This guide explains the difference, when to use each, and gives a worked example matching Klar’s markup & margin calculator.
Two different bases for the same profit
Markup = profit ÷ cost × 100, and margin = profit ÷ selling price × 100. Because the bases differ, markup always looks larger than margin for the same profit. For example a profit of 40 from a cost of 80 and a price of 120 gives a markup of 50% and a margin of 33.3%.
A worked example
Using the calculator’s values: cost 80, selling price 120. The result: profit 40, markup 50%, and margin 33.3%.
When to use which
Use markup when you start from cost and add a percentage (pricing for sale). Use margin when you want a specific profit out of the selling price or when comparing yourself with competitors who quote margins. The key is to know which base you and your audience are using.
Loss cases
When the selling price falls below cost, profit is negative and both percentages show as negative. This is a clear signal that the price does not cover the cost, and lowering the price without looking at cost is not enough.
Key takeaways
- Markup = profit ÷ cost, and margin = profit ÷ selling price.
- Markup is larger than margin for the same profit.
- Use markup from cost, and margin from selling price.
- Negative profit yields two negative percentages (a loss).
Frequently asked questions
Which number do I use when pricing?
Use markup when you add a percentage on top of cost, and margin when you set the profit out of the selling price. Know which base you and the people you talk to are using.
Can both percentages be negative?
Yes. When the selling price is below cost, the calculation shows a negative profit and negative percentages meaning a loss.
Related calculators
Markup & margin calculator
Compute profit, markup percentage and margin percentage from cost and selling price.
Break-even calculator
Find how many units you must sell to cover fixed and variable costs and reach break-even.
Wholesale to retail calculator
Set a retail price from wholesale cost and a markup percentage, with the per-unit profit.