Margin vs. Markup: The Critical Difference
Definitions
Profit Margin = (Profit ÷ Revenue) × 100. It answers: "What percentage of my selling price is profit?" Markup = (Profit ÷ Cost) × 100. It answers: "What percentage above my cost am I charging?" These are NOT the same number. A 50% markup results in only a 33.3% margin.
| Markup % | Margin % |
|---|---|
| 15% | 13.0% |
| 25% | 20.0% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
| 200% | 66.7% |
Conversion Formulas
Margin to Markup: Markup = Margin ÷ (1 − Margin). Markup to Margin: Margin = Markup ÷ (1 + Markup). Example: 40% margin = 40 ÷ (100 − 40) = 66.7% markup.
Gross Margin vs. Net Margin
Gross Profit Margin
Gross margin = (Revenue − COGS) ÷ Revenue × 100. COGS (Cost of Goods Sold) includes only direct costs: materials, direct labor, and manufacturing overhead. Apple Inc.'s gross margin was 46.2% in fiscal 2023, meaning for every dollar of revenue, 46.2 cents covered gross profit before operating expenses.
Net Profit Margin
Net margin = (Revenue − All Expenses) ÷ Revenue × 100. This includes COGS plus operating expenses, taxes, interest, depreciation, and amortization. Net margin is always lower than gross margin. Amazon's net margin is only about 3.6% despite enormous revenue — thin margins compensated by massive volume.
Step-by-Step Instructions
- 1Enter your cost (what you pay) and selling price (revenue).
- 2View the calculated profit margin, markup, and profit amount.
- 3Or enter margin percentage and cost to find the required selling price.
- 4Use the margin-to-markup converter for quick reference.
- 5Review the comparison table to understand margin-markup relationships.