Markup and margin both describe the profit on a sale, but they measure it against different numbers, and they are not interchangeable. Markup is profit as a share of your cost. Margin is profit as a share of your price. This calculator does the conversion for you in both directions and works out the price a cost needs to reach the margin you want.
Find the price for a target margin
Convert one percentage into the other
The formulas
- Markup % = (price − cost) ÷ cost × 100
- Margin % = (price − cost) ÷ price × 100
- Margin from markup: margin = markup ÷ (1 + markup)
- Markup from margin: markup = margin ÷ (1 − margin)
- Price from cost and margin: price = cost ÷ (1 − margin)
- Price from cost and markup: price = cost × (1 + markup)
Worked example
Illustrative numbers only. A part costs you $60.
- Sold at $90, the profit is $30. The markup is $30 ÷ $60 = 50%. The margin is $30 ÷ $90 = 33.3%.
- To earn a 40% margin on the same part, the price has to be $60 ÷ (1 − 0.40) = $100. That is a 66.7% markup, not 40%.
The same dollars, two different percentages. The calculators above reproduce both results with the default numbers.
Why the mix-up costs money
If you decide you want a 40% margin and add 40% to your cost, you charge $84 for a $60 part. Your profit is $24, which is a margin of only 28.6%. Every sale falls short of the target by the same proportion, so the shortfall adds up across the year. Decide which measure your target is in, and convert before you price.
Which should you use
Many shops price up from cost with a markup, because the cost is the number in front of them, and then judge the business down from the price with a margin, because that is how profit and loss statements are read. Both are fine. The mistake is comparing a markup to a margin. Use the conversion above whenever a target is stated in one and your price list is built in the other.
What this does not include
Margin here is gross margin on the cost you enter. It does not cover overhead such as rent, software, advertising or your own unbilled time, so a job needs a margin well above your overhead share to leave any net profit. For the full cost of a technician's hour, use the technician true cost calculator. To check a finished job, use the job profit margin calculator.
FAQ
What is the difference between markup and margin?
Both measure profit, against different bases. Markup divides the profit by the cost, and margin divides it by the price. Because the price is larger than the cost, the markup percentage is always higher than the margin percentage for the same sale.
How do I convert markup to margin?
Divide the markup by one plus the markup. A 50% markup is 0.5 ÷ 1.5 = 33.3% margin.
How do I convert margin to markup?
Divide the margin by one minus the margin. A 40% margin is 0.4 ÷ 0.6 = 66.7% markup.
Can a margin be 100%?
No. A 100% margin would mean the cost is zero. The calculator shows a dash for 100% or more because the price would be undefined.
This calculator is for education and planning. It runs entirely in your browser; nothing you enter is sent anywhere. It is not tax or accounting advice.