Business & SaaS

Margin vs Markup

Understand the difference between gross margin and markup percentage.

Margin and markup both describe profit but are calculated differently. Margin is profit as a percentage of selling price. Markup is profit as a percentage of cost. Confusing the two is one of the most common and costly business math errors.

Enter your numbers

Cost ($)

Selling Price ($)

Results update as you change the inputs. Calculations run in your browser.

Gross Margin

50.0%

markup: 100.0%
profit: $50.00
price From Markup: For 100% markup, cost × 2.00 = price

See the formula

Formula and method

Margin = (Price - Cost) / Price × 100 | Markup = (Price - Cost) / Cost × 100

Gross margin measures profit relative to revenue — how many cents of each dollar is profit. Markup measures profit relative to cost — how much was added on top of cost.

Worked examples

Retail product

Cost ($):: 35
Selling Price ($):: 85

Gross Margin: 58.8%

Service business

Cost ($):: 40
Selling Price ($):: 150

Gross Margin: 73.3%

Assumptions and limits

Gross margin only — does not include overhead or operating expenses

This tool provides an educational estimate. Rules, rates and personal circumstances can change the answer. Review the assumptions before relying on a result. Report a correction.

Common mistakes to avoid

Adding a "50% margin" by multiplying cost × 1.5 — this produces 33% margin, not 50%.
Using markup % instead of margin % when comparing to industry benchmarks — most financial reporting uses margin.
Forgetting to account for overhead when setting prices — cost of goods is only part of total cost.

Frequently asked questions

I want a 40% margin — what markup do I use?

To achieve a 40% margin: Price = Cost / (1 - 0.40) = Cost × 1.667. In markup terms, that is a 66.7% markup. Many business owners confuse this and underprice significantly.

What margins should I target?

Industry benchmarks vary widely. Grocery retail: 2-5%. SaaS software: 60-80%. Consulting services: 50-70%. Construction: 10-20%. Always compare to your industry, not generic targets.