Markup vs Margin Calculator

Most pricing mistakes in small shops come from one confusion: the word “percent” is used for two different things. Markup is added to the cost. Margin is the share of the selling price that you keep. A shop that plans for a 30 percent margin but adds 30 percent to cost earns less than it expects on every sale. This page works in both directions so that you can see the price, the profit, the markup and the margin together.

The two definitions

Markup = profit ÷ cost. Margin = profit ÷ price. They describe the same profit, so they are linked: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). Markup is always the larger number for any profit above zero, because the cost is smaller than the price. The table at the bottom of the page lists the pairs so you can look them up without a calculator.

The four modes

You choose what you know. With cost and markup, the price is cost × (1 + markup). With cost and margin, the price is cost ÷ (1 − margin). With cost and price, the page works out both percentages. With price and margin, it finds the cost you could pay and still keep that margin, which is useful when negotiating with a supplier. Each mode shows the same five lines: cost, price, profit per unit, markup and margin.

A worked example

The default is a cost of 40 with a 50% markup. The price is 60.00, the profit 20.00, the markup 50.00% and the margin 33.33%. If you wanted a 40% margin on a cost of 25 instead, the price is 41.67 and the profit 16.67, which is a markup of 66.67%. Checking a shelf price, a cost of 18 against a price of 29.99 gives a profit of 11.99, a markup of 66.61% and a margin of 39.98%. In the table, a 10% markup is a 9.09% margin, a 25% markup is a 20% margin, a 100% markup is a 50% margin and a 200% markup is a 66.67% margin. Going the other way, a 50% margin needs a 100% markup, and an 80% margin needs a 400% markup.

Choosing which one to plan with

Margin is easier to connect to your accounts, because costs, tax and overheads are all shares of revenue. Markup is easier at the till or the supplier’s desk, because it works from the number on the invoice. Plan with margin, quote with whichever your trade uses, and convert with the table. If a distributor gives you a “wholesale discount”, that is a margin on the list price, not a markup.

Edge cases

A cost of zero is rejected, because markup cannot be worked out against nothing. In the cost-and-price mode a price below cost is allowed and shows a negative markup and margin, which is a loss. Margins are capped at 99.99 so that the price stays finite. Results are shown to two decimals, so rounding the price to 41.67 and recalculating gives 66.68%, not exactly 66.67%.

Limits

Everything is before tax, freight and fees. A price that includes sales tax or VAT would overstate the profit, so take the tax out first with a tax calculator. The page also does not round to price points such as 9.99 or 4.95, which you will probably want on a shelf.

Related tools

• Break-Even Point Calculator shows how many sales the margin must carry.
• Wholesale vs Retail Tiered Pricing Calculator applies a margin at each step of the supply chain.
• Profit Margin Calculator gives the margin from revenue and cost directly.
• Discount Calculator shows what a sale price does to the percentage you keep.