Margin vs Markup Calculator
They are not the same number, and treating them as if they were is the most expensive arithmetic mistake in this trade.
The two formulas, and a worked example Show the arithmetic
markup = (price - cost) / COST "added on top of cost" margin = (price - cost) / PRICE "share of revenue kept" Going the other way: price from markup = cost x (1 + markup) price from margin = cost / (1 - margin) Note one MULTIPLIES and the other DIVIDES. That is the whole mistake: cost x 1.35 is a 35% markup, not a 35% margin. The 35% margin price is cost / 0.65.
Worked example, $100 of cost
50% MARKUP: 100 x (1 + 0.50) = $150
margin earned = (150 - 100) / 150 = 33.3%
50% MARGIN: 100 / (1 - 0.50) = $200
markup applied = (200 - 100) / 100 = 100%
Same "50%", $50 apart on a $100 job. Conversion table
If you want this margin, apply this markup — or just multiply cost by the multiplier.
| Target margin | Equivalent markup | Multiply cost by |
|---|---|---|
| 10% | 11.1% | 1.1111 |
| 20% | 25.0% | 1.2500 |
| 25% | 33.3% | 1.3333 |
| 30% | 42.9% | 1.4286 |
| 35% | 53.8% | 1.5385 |
| 40% | 66.7% | 1.6667 |
| 50% | 100.0% | 2.0000 |
| 60% | 150.0% | 2.5000 |
Computed from the formulas above, and every row is asserted in this site's test suite — a wrong number on this page in particular would be indefensible.
Common questions
What is the difference between margin and markup?
They measure the same profit against different bases. Markup is profit divided by COST — "how much I added on top". Margin is profit divided by PRICE — "what share of the money coming in I keep".
Because price is always larger than cost, the margin percentage is always smaller than the markup percentage for the same job. They only coincide at zero.
Why does confusing them lose money?
Because "add 50%" almost always gets applied as a markup while the person means a margin. Multiplying a $100 cost by 1.5 gives $150, which is a 33.3% margin, not 50%. To actually earn a 50% margin the price is $200.
On a 35% target the gap is smaller but relentless: multiplying by 1.35 yields a 25.9% margin instead of 35%, so roughly nine cents of every revenue dollar you planned for simply is not there.
Which one should I price with?
Margin, because it answers the question that matters: of the money the customer hands over, how much stays with the business. It is also what your accounts report, so pricing in margin means your quotes and your books speak the same language.
Use markup only when a supplier quotes you a cost and you want a quick multiplier — and convert it to margin before you believe anything about profitability.
Can margin be 100%?
No. A 100% margin would mean cost is zero, since margin is profit divided by price. As the target margin approaches 100% the required price approaches infinity — at 90% the price is ten times cost, and at 99% it is a hundred times.
Markup has no such ceiling: a 400% markup is perfectly meaningful and equals an 80% margin.
Related tools
Sources
- Definitions - margin = (price - cost) / price; markup = (price - cost) / cost. Standard accounting definitions; both are unit-tested in this site's suite, including round-trip conversion.
- How to Price Lawn Mowing - the full pricing method this feeds into