What is the difference between margin and markup?

The base. Margin divides profit by revenue and markup divides it by cost, so a 30 percent markup is a 23 percent margin. Pricing on the wrong one loses the difference on every sale.

Should I use gross or net margin?

Gross to judge whether a product works, since it excludes overhead. Net to judge whether the business does. Quoting one as if it were the other is common and misleading.

Businesspricing

Profit Margin Calculator

Profit margin with the equivalent markup, because confusing the two is the most expensive arithmetic error in pricing. A 30 percent markup is a 23 percent margin, so pricing at cost plus 30 when you meant a 30 percent margin loses seven points on every sale.

Also called: margin calculator, profit percentage calculator.

Profit margin

30%

30% margin on 100,000 of revenue, a profit of $30,000.00. The equivalent markup is 42.86%, which is the same money on a different base. Enter the direct cost separately to split gross margin from net, which answer different questions. Enter a target margin to see the price it requires. Dividing by one less the margin is correct; multiplying by one plus it is the markup error.

Profit

$30,000.00

Equivalent markup

42.86%

Gross margin

30%

Overhead as a share of revenue

Profit per unit

$0.00

Units to cover overhead

$0.00

Price for your target margin

$0.00

Revenue needed at the current cost

$0.00

On gross against net

Enter the direct cost separately to split gross margin from net, which answer different questions.

On the target

Enter a target margin to see the price it requires. Dividing by one less the margin is correct; multiplying by one plus it is the markup error.

How this is calculated

Method and background

How this is calculated

Margin divides profit by revenue and markup divides the same profit by cost. Since revenue is the larger number, the margin is always the smaller percentage, and the gap widens as they rise: a 100 percent markup is a 50 percent margin. Separating direct cost from overhead splits gross margin from net, which matter for different decisions: gross margin says whether the product works and net says whether the business does.

the same profit over a different base, which is why the two numbers never match

R: Revenue
C: Cost

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.

a 30 percent margin

Revenue: $100,000.00
Total cost: $70,000.00
Of that, direct cost of goods: $0.00
Units sold: 0
Target margin: 0%

Profit margin30%

the same 30,000 profit over 100,000 of revenue and over 70,000 of cost

Open this example

a target margin needs division, not multiplication

Revenue: $100,000.00
Total cost: $70,000.00
Of that, direct cost of goods: $55,000.00
Units sold: 1,000
Target margin: 40%

Profit margin30%

boundary: 70,000 over 0.6, not 70,000 times 1.4

Open this example

Method and limits

What it assumes

Costs and revenue for the same period.

What it deliberately does not model

A blended margin across products hides that some lose money.
Where overhead is not separated, the single figure is a net margin and not comparable with a gross one.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

What is the difference between margin and markup?: The base. Margin divides profit by revenue and markup divides it by cost, so a 30 percent markup is a 23 percent margin. Pricing on the wrong one loses the difference on every sale.
Should I use gross or net margin?: Gross to judge whether a product works, since it excludes overhead. Net to judge whether the business does. Quoting one as if it were the other is common and misleading.