Skip to content
BZworkops.

Calculators

Profit margin vs markup: pricing with the right percentage

Compare margin and markup using the same cost and selling price, then calculate a price for a target margin.

By BZ WorkOps ·

Open Profit Margin Calculator →

The denominator changes the meaning

Profit is selling price minus cost. Margin divides that profit by selling price; markup divides it by cost. They describe the same transaction from different starting points, so a 40% markup and a 40% margin do not produce the same price.

Decide what your cost includes before using either percentage. A product purchase cost alone omits delivery, packaging and other expenses. This tool calculates the arithmetic from your inputs; it does not determine accounting categories or calculate your business’s net profit.

Example: cost 60, selling price 100

Profit is 100 − 60 = 40. Margin is 40 ÷ 100 × 100 = 40%. Markup is 40 ÷ 60 × 100 = 66.67%. Both percentages are correct for the same sale, but they answer different questions.

If you apply a 40% markup to cost 60, the selling price is 60 × 1.40 = 84. Profit is 24 and margin is 24 ÷ 84 × 100 = 28.57%. This is why adding your target margin percentage to cost can leave you below your intended margin.

Price for a target margin

  1. Open Profit Margin Calculator and choose Price from a target margin.
  2. Enter your cost using the same currency and tax basis you intend for the selling price.
  3. Enter a target margin below 100%. A positive cost cannot be recovered at a 100% margin.
  4. Choose Calculate. Cost 60 with a target margin of 40% gives price = 60 ÷ (1 − 0.40) = 100.
  5. If you round the price or offer a discount, switch to Find profit and margin and enter that final price to check the resulting margin.

Compare before making a pricing decision

A discount changes the selling-price denominator as well as profit. With cost 60 and a discounted price of 90, profit becomes 30 and margin becomes 33.33%. The original 40% margin no longer applies.

The calculator permits a loss: cost 60 and price 50 gives profit −10 and margin −20%. Markup is undefined at zero cost, and margin requires a selling price above zero. Include relevant costs consistently and use the output as a calculation rather than a recommendation of what to charge.

Questions and answers

Is markup the same as margin?

No. Markup uses cost as its base; margin uses selling price. For cost 60 and price 100, markup is 66.67% while margin is 40%.

Do I enter tax-inclusive prices?

Use a consistent basis for cost and price. Mixing tax-exclusive cost with tax-inclusive price can distort the comparison; the tool does not choose a tax treatment.

Found a mistake or need help with this task? Contact BZ WorkOps and include the guide title.