What is the difference between markup and margin?

Both are the same profit, measured against different things. Markup is profit as a share of your cost; margin is profit as a share of the selling price. Buy at $800, sell at $1,000: the $200 profit is a 25% markup (200 ÷ 800) but a 20% margin (200 ÷ 1,000). Margin is always the smaller number.

How do I price a job for a set margin?

Divide the cost by one minus the margin. For a 25% margin on $800 of cost: 800 ÷ 0.75 = $1,066.67. Multiplying the cost by 1.25 instead gives $1,000 — a 25% markup, which is only a 20% margin.

How do I convert markup to margin?

Margin = markup ÷ (1 + markup). A 50% markup is 0.5 ÷ 1.5 = 33.3% margin. The other way, markup = margin ÷ (1 − margin): a 30% margin needs a 42.9% markup.

Can a margin be 100%?

No. A 100% margin would mean the whole price is profit and the job cost nothing. Margins approach 100% as the price grows, but never reach it. Markup has no ceiling — a 300% markup is a price four times the cost.

Markup & margin calculator

Arithmetic on the figures you type. It does not know your overhead, taxes or what the market will bear — put your full cost in the first box and the numbers follow.

Type what the job costs you, then either the markup you add, the margin you want to keep, or the price you are thinking of quoting. The calculator gives the price, the profit, and both percentages together — because the most expensive mistake in estimating is adding 25% to cost and believing you kept 25%.

Worked example

A bathroom rough-in costs you $800 in materials and labour. Add a 25% markup: 800 × 1.25 = $1,000, a $200 profit. As a share of the price that is 200 ÷ 1,000 = 20% margin. If the business needs a 25% margin, the price is 800 ÷ (1 − 0.25) = $1,066.67 — a 33.3% markup. The gap between the two quotes, $66.67 on one small job, is the whole point.

Try one

Quick referencefor pricing

Markup: profit ÷ cost · price = cost × (1 + markup)
Margin: profit ÷ price · price = cost ÷ (1 − margin)
Markup → margin: 10% 9.1 · 20% 16.7 · 25% 20 · 33.3% 25 · 50% 33.3 · 100% 50
Margin → markup: 10% 11.1 · 15% 17.6 · 20% 25 · 25% 33.3 · 30% 42.9 · 40% 66.7 · 50% 100

The formula

markup = (price − cost) ÷ cost · margin = (price − cost) ÷ price

Same profit on top, a different number underneath. Because the price is always bigger than the cost, the margin is always smaller than the markup — and the gap widens as the percentages grow.

Questions

What is the difference between markup and margin?: Both are the same profit, measured against different things. Markup is profit as a share of your cost; margin is profit as a share of the selling price. Buy at $800, sell at $1,000: the $200 profit is a 25% markup (200 ÷ 800) but a 20% margin (200 ÷ 1,000). Margin is always the smaller number.
How do I price a job for a set margin?: Divide the cost by one minus the margin. For a 25% margin on $800 of cost: 800 ÷ 0.75 = $1,066.67. Multiplying the cost by 1.25 instead gives $1,000 — a 25% markup, which is only a 20% margin.
How do I convert markup to margin?: Margin = markup ÷ (1 + markup). A 50% markup is 0.5 ÷ 1.5 = 33.3% margin. The other way, markup = margin ÷ (1 − margin): a 30% margin needs a 42.9% markup.
Can a margin be 100%?: No. A 100% margin would mean the whole price is profit and the job cost nothing. Margins approach 100% as the price grows, but never reach it. Markup has no ceiling — a 300% markup is a price four times the cost.

Related tools

Spot something wrong on this page? Report it

Thanks — your report was sent.

That didn’t send. Please try again later.