Margin and markup formulas
Profit = price − cost
Margin = profit ÷ price × 100
Markup = profit ÷ cost × 100
Margin tells you how much of every sales dollar you keep. Markup tells you how much you added on top of your cost. Mixing them up is one of the most common pricing mistakes: a 50% markup is only a 33.3% margin.
Margin vs. markup table
| Markup | Margin |
|---|
| 25% | 20% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
| 200% | 66.7% |
Worked example
You buy a product for $60 and sell it for $100. The profit is $40, the margin is 40% and the markup is 66.7%. To get a 50% margin instead, the price must be 60 ÷ 0.5 = $120.
Tips for pricing
- Include every cost in your cost figure: materials, shipping, packaging and platform or payment fees.
- Price from margin, not markup, if you plan your budget as a share of sales.
- Check competitors. The right price balances your margin with what customers will pay.
Measuring an investment rather than a product? Use the ROI calculator.
Last reviewed October 2026.
Frequently asked questions
What is the difference between margin and markup?
Both compare profit with a price, but against different bases. Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. An item that costs $60 and sells for $100 has a 40% margin and a 66.7% markup.
How do I calculate profit margin?
Subtract the cost from the selling price to get the profit, divide by the selling price, and multiply by 100. ($100 − $60) ÷ $100 × 100 = 40%.
How do I find the price for a target margin?
Divide the cost by (1 − target margin ÷ 100). For a 40% margin on a $60 cost: 60 ÷ 0.60 = $100. Use the "Price from margin" box on this page.
Can a margin be more than 100%?
No. Margin is a share of the selling price, so it can approach 100% but never exceed it. Markup has no upper limit: selling a $10 item for $50 is a 400% markup but an 80% margin.
What is a good profit margin?
It depends heavily on the industry. Grocery stores often run on thin margins, while software and luxury goods tend to have much higher ones. Compare your margins with businesses like yours rather than with a single rule.