Unit Economics
Markup vs Margin: The Difference, Calculator, and Why CFOs Care
Markup is profit divided by cost, while margin is the same profit divided by price, so the two describe the same dollar with different denominators. A $40 product sold for $100 carries a 150 percent markup but a 60 percent margin. Confusing them is costly: a 50 percent markup equals only a 33 percent margin, a 17 point gap that distorts pricing and competitor comparisons.
Two ways to describe the same dollar of profit. Markup is the amount added on top of cost, divided by cost. Margin is the same amount, divided by price. Same business decision, different percentages. Confusing the two leads to real pricing mistakes.
Markup vs Margin Calculator
The formulas
Markup (%): ((Price − Cost) ÷ Cost) × 100
Margin (%): ((Price − Cost) ÷ Price) × 100
The conversion math
Margin = Markup ÷ (1 + Markup)
Markup = Margin ÷ (1 − Margin)
Common conversions (markup to margin)
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33% |
| 60% | 38% |
| 75% | 43% |
| 100% | 50% |
| 150% | 60% |
| 200% | 67% |
| 300% | 75% |
| 400% | 80% |
Common conversions (margin to markup)
| Margin | Markup |
|---|---|
| 20% | 25% |
| 33% | 50% |
| 40% | 67% |
| 50% | 100% |
| 60% | 150% |
| 67% | 200% |
Worked example
You source a product for $40. You sell it for $100. Your profit per unit is $60.
- Markup: $60 ÷ $40 = 150%. You marked it up by 150% of your cost.
- Margin: $60 ÷ $100 = 60%. 60% of every revenue dollar is profit.
Same business, same dollars, two different headline numbers. A salesperson quoting "150% markup" sounds aggressive; a CFO quoting "60% margin" sounds healthy. Both correct.
Which one to use when
- Margin — internal financial reporting, management decisions, board reporting, valuation work, comparing brands. Default for ecom CFOs.
- Markup — supplier negotiations, cost-plus pricing, retail / manufacturing math. Useful when starting from cost.
The common mistake
Comparing your "50% margin" to a competitor's "50% markup" and assuming they're equivalent. They're not — 50% markup is 33% margin. The competitor is 17 percentage points less profitable than the comparison suggests. Always confirm which one is being quoted.
Healthy levels by vertical
- Beauty / personal care DTC: 70-78% margin (230-355% markup)
- Apparel DTC: 50-62% margin (100-163% markup)
- Outdoor / hardgoods DTC: 50-58% margin (100-138% markup)
- Food & beverage CPG: 28-42% margin (39-72% markup)
- Household CPG: 38-48% margin (61-92% markup)
Where each lives in the P&L
Both markup and margin describe gross-level economics — revenue minus COGS. They don't capture contribution margin (after fulfilment + payment + returns + marketing). For real unit economics, see What is CM1? and What is CM2?, or the full contribution margin framework.
Frequently Asked Questions
What's the difference between markup and margin?
Markup is profit ÷ cost. Margin is profit ÷ price. Same dollars, different denominators.
How do I convert?
Margin = Markup ÷ (1 + Markup). Or: Markup = Margin ÷ (1 − Margin).
Which to use for pricing?
Margin for internal decisions. Markup for supplier negotiations.
Why do industries quote one or the other?
Retail/manufacturing default to markup (cost-based). Ecom/SaaS default to margin (revenue-based).
Healthy ranges?
Beauty 70-78% margin, apparel 50-62%, food/bev 28-42%. Vertical-specific.
Related
- What is gross margin?
- What is CM1?
- What is COGS?
- What is landed cost?
- Contribution margin calculator
Need a CFO to set vertical-appropriate margin targets? Talk to a CFO.