Margin vs Markup
Two pricing terms that are often confused — and how to avoid losing money by mixing them up.
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Margin and markup describe the same price using different reference points. Treating them as the same is one of the most common pricing mistakes in small business.
Definitions
Margin % = (Price − Cost) ÷ Price × 100 Markup % = (Price − Cost) ÷ Cost × 100
Margin is based on the selling price. Markup is based on the cost.
Why it matters
- A 50% markup is not a 50% margin.
- Confusing the two can quietly drop your real profit.
- Suppliers may quote markup; reports usually show margin.
Practical example
A product costs €40 and you sell it for €60. Markup = (60 − 40) ÷ 40 = 50%. Margin = (60 − 40) ÷ 60 = 33.3%. Same price, very different numbers.
How to interpret
- Use margin when thinking about profitability of a sale.
- Use markup when setting a price from a known cost.
Next steps
- Pick one term internally and stick with it.
- Always double-check whether a supplier quote means margin or markup.
Open the Profitability calculator →
This guide is for educational and planning purposes only. It is not accounting, tax, legal, investment, or financial advice.