About the Margin & Markup
Margin and markup are the two numbers most often confused in small business pricing, and mixing them up quietly destroys profitability. Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. This tool shows both and reverse-engineers the price you need for a target margin.
How to use the Margin & Markup
- Enter the unit cost of the product or service.
- Enter your selling price to see the resulting profit, margin, and markup.
- Or enter a target margin to get the price you must charge.
- Compare markup and margin — a 50% markup is only a 33.3% margin.
The formula behind it
Margin % = (price − cost) ÷ price × 100. Markup % = (price − cost) ÷ cost × 100. Price for a target margin = cost ÷ (1 − margin/100).
Frequently asked questions
What is the difference between margin and markup?
Both measure the same cash profit against different bases. Cost 100 and price 150 gives a 50% markup but a 33.3% margin. Quoting markup where a margin was expected overstates profitability.
What margin should my business target?
It is industry-specific. Grocery retail runs on single-digit net margins, software often exceeds 70% gross margin, and restaurants typically target 60–70% gross margin on food to cover heavy overheads.
Is this gross or net margin?
Gross. It compares price against direct cost only. Net margin additionally subtracts overheads, marketing, salaries, and tax.
How do I price for a 40% margin?
Divide the cost by 0.6. A product costing 30 needs a price of 50 to deliver a 40% margin — not 42, which is what adding 40% to cost would give you.