How do I convert a markup to a margin?

Margin = markup / (1 + markup). A 25% markup is a 20% margin, a 50% markup is a 33.3% margin, and a 100% markup is a 50% margin. Going the other way, markup = margin / (1 - margin).

Which should I price on?

Price on markup, because it starts from a cost you know, and report on margin, because that is what the accounts show. Setting a markup target while measuring margin performance is how the two get confused in the first place.

Businesspricing

Markup vs Margin Converter

Convert between markup and margin in either direction. A 50% markup is a 33.3% margin; a 50% margin is a 100% markup. Getting these the wrong way round is a pricing error that compounds on every sale.

Also called: markup or margin, difference between markup and margin.

Equivalent percentage

33.33%

A 50% markup is equivalent to 33.33% the other way. They describe the same profit against different denominators.

How this is calculated

Method and background

How this is calculated

Both describe the same profit. Markup divides it by cost, margin divides it by price. Since price is cost plus profit, the two are related by margin = markup/(1+markup), and the conversion is exact in both directions. Except at a 100% margin, which would require an infinite markup.

margin = markup/(1+markup); markup = margin/(1-margin)

m: Markup as a decimal (decimal)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

50% markup is a 33.33% margin

I have: A markup, and want the margin
Percentage: 50%

Equivalent percentage33.33%

arithmetic identity

Open this example

50% margin is a 100% markup

I have: A margin, and want the markup
Percentage: 50%

Equivalent percentage100%

arithmetic identity: the inverse of the case above

Open this example

a 100% margin has no finite markup

I have: A margin, and want the markup
Percentage: 100%

Equivalent percentage0%

degenerate case: zero cost, so the engine declines rather than returning Infinity

Open this example

Frequently asked questions

How do I convert a markup to a margin?: Margin = markup / (1 + markup). A 25% markup is a 20% margin, a 50% markup is a 33.3% margin, and a 100% markup is a 50% margin. Going the other way, markup = margin / (1 - margin).
Which should I price on?: Price on markup, because it starts from a cost you know, and report on margin, because that is what the accounts show. Setting a markup target while measuring margin performance is how the two get confused in the first place.