Margin and markup are easy to mix up, and the mix-up can quietly cost you money. Enter your cost and any one of the selling price, the margin or the markup, and this free calculator works out the other two and the profit on each sale.
Margin vs markup: what is the difference?
Markup is the profit as a percentage of your cost. Margin is the profit as a percentage of your selling price. The same sale gives two different percentages, and markup is always the bigger number.
Example: something costs you 50 and you sell it for 80. The profit is 30. The markup is 30 ÷ 50 = 60%. The margin is 30 ÷ 80 = 37.5%.
Formulas
- Profit = selling price − cost
- Margin % = profit ÷ selling price × 100
- Markup % = profit ÷ cost × 100
- Selling price for a target margin = cost ÷ (1 − margin)
- Selling price for a target markup = cost × (1 + markup)
Margin and the markup you need to reach it
| Target margin | Markup needed |
|---|---|
| 20% | 25% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
A common mistake is adding 30% to your cost and calling it a 30% margin. That actually gives a margin of about 23%. If you want a 30% margin, you need a markup of about 43%.
Tips for pricing
- Count all your costs, including software, fees and your own time, before you set a price.
- Decide on the margin you need first, then work out the price. Do not start from what competitors charge.
- If you sell your time, use the freelance hourly rate calculator to set a floor for your rate.
- Send the price to your client with our free invoice generator.
Frequently asked questions
Is margin or markup better to use?
Neither is better; they answer different questions. Margin tells you how much of each sale you keep. Markup is a handy way to set a price from your cost. Just be clear which one you mean.
Can markup be over 100%?
Yes. If you sell something for more than double its cost, the markup is over 100%. Margin can never reach 100%.
What is a good profit margin?
It depends on your industry and costs. Use the calculator to see what your current prices give you, then compare it with what you need to cover your time and overheads.
This calculator is for general guidance and does not include tax. Check your own figures before you set prices.