Financial education
Markup vs Margin: What Is the Difference?
Markup is calculated from cost, while margin is calculated from selling price.
How the math works
Markup is profit as a percentage of cost; margin is profit as a percentage of selling price. Because the selling price is always larger than the cost (when there's a profit), margin is always a smaller percentage than markup on the exact same dollar profit.
Worked example
An item costing $50 sold for $70 has $20 profit. As markup, that's $20/$50 = 40%. As margin, it's $20/$70 = 28.6% — two different, both-correct percentages describing the same $20.
What to watch for
- Always specify which one you mean — '40% markup' and '40% margin' describe different profit amounts
- Retail pricing conversations often default to margin; wholesale and manufacturing often default to markup
- Converting between them isn't a straight subtraction — it requires going through the actual cost and price
Practical takeaway
When you see a percentage in a pricing conversation, confirm whether it's markup or margin before comparing it to your own numbers.