Most people use "margin" and "markup" interchangeably. They're not the same thing, and confusing them can make you think you're profitable when you're actually losing money.

The Key Difference

Markup is profit as a percentage of COST.

Margin is profit as a percentage of SELLING PRICE.

Same numbers, different base, wildly different results.

Example: £60 Cost, £100 Selling Price

Profit = £40

Markup: £40 profit ÷ £60 cost = 66.7%

Margin: £40 profit ÷ £100 selling price = 40%

Same item. Same profit. Different percentages.

Why This Matters

If you think "I need a 50% markup," you might price your £60 item at £90 (£60 + 50% = £90).

But if you actually need a 50% MARGIN, you need to price it at £120 (because £60 is 50% of £120).

That's a £30 difference. Over hundreds of sales, that's thousands in lost profit.

Which Should You Use?

Use markup if:

• You buy and resell products
• You're in retail or wholesale
• You calculate prices from supplier costs

Use margin if:

• You're analyzing business performance
• You're comparing to industry standards
• You want to know what % of revenue is profit

Most businesses use markup for pricing and margin for analysis.

Converting Between Them

Markup to Margin:

Margin = Markup ÷ (1 + Markup)

Example: 50% markup = 50% ÷ 1.5 = 33.3% margin

Margin to Markup:

Markup = Margin ÷ (1 - Margin)

Example: 40% margin = 40% ÷ 0.6 = 66.7% markup

The Trap: "50% Off" Sales

A retailer with a 50% markup might think they can do a "50% off sale" and break even. Wrong.

• Cost: £60
• Markup: 50%
• Price: £90 (£60 + £30)
• 50% off: £45 sale price
• Loss: £15 per item

That's because a 50% markup only gives you a 33% margin. A 50% discount wipes you out.

This is why you see "up to 50% off" instead of "everything 50% off."

Quick Reference Table

| Markup | = Margin |

|--------|----------|

| 25% | 20% |

| 33% | 25% |

| 50% | 33% |

| 100% | 50% |

| 150% | 60% |

Use our Profit Margin Calculator to avoid these mistakes.