Margin vs Markup: Formulas, Full Conversion Chart and Worked Examples
Markup and margin measure the same profit against different bases. Markup divides profit by what the item cost you. Margin divides profit by what you sold it for. If an item costs $60 and sells for $100, profit is $40, so the markup is $40 / $60 = 66.67% and the margin is $40 / $100 = 40%.
On any profitable sale the price is bigger than the cost, so markup is always the larger percentage. A 50% markup is only a 33.33% margin, and a 100% markup (doubling your cost) is a 50% margin. Treating one as the other is a common pricing error, and it costs real money. Below are both formulas, a markup to margin chart and a margin to markup chart, pricing for a target margin and industry benchmarks. To check your own numbers, use the Markup Calculator or the Profit Margin Calculator.
The Margin and Markup Formulas
Both start with profit, which is the selling price minus the cost. They differ only in what you divide by:
profit = price - cost
markup = profit / cost
margin = profit / price
Convert one to the other:
margin = markup / (1 + markup)
markup = margin / (1 - margin)
Set a price:
price = cost x (1 + markup)
price = cost / (1 - margin)
Check them with the $60 and $100 item: 0.6667 / 1.6667 = 0.40, and 0.40 / 0.60 = 0.6667.
Two limits follow. Margin can never reach 100%, because that would mean the item cost nothing. Markup has no ceiling: a 300% markup means selling at four times your cost, which is a 75% margin. Penn State Extension shows that a 30% markup gives only about a 23% margin, and Oregon State University Extension shows that a 25% markup gives a 20% margin.
Markup to Margin Chart (5% to 300%)
Find your markup in the left column to see the margin it really earns. The last column shows the selling price when an item costs $100, so you can also read it as a price multiplier. Shaded rows are the ones worth memorizing.
| Markup on cost | Margin on price | Price if the cost is $100 |
|---|---|---|
| 5% | 4.76% | $105.00 |
| 10% | 9.09% | $110.00 |
| 15% | 13.04% | $115.00 |
| 20% | 16.67% | $120.00 |
| 25% | 20.00% | $125.00 |
| 30% | 23.08% | $130.00 |
| 33.33% | 25.00% | $133.33 |
| 35% | 25.93% | $135.00 |
| 40% | 28.57% | $140.00 |
| 45% | 31.03% | $145.00 |
| 50% | 33.33% | $150.00 |
| 55% | 35.48% | $155.00 |
| 60% | 37.50% | $160.00 |
| 65% | 39.39% | $165.00 |
| 70% | 41.18% | $170.00 |
| 75% | 42.86% | $175.00 |
| 80% | 44.44% | $180.00 |
| 85% | 45.95% | $185.00 |
| 90% | 47.37% | $190.00 |
| 95% | 48.72% | $195.00 |
| 100% | 50.00% | $200.00 |
| 125% | 55.56% | $225.00 |
| 150% | 60.00% | $250.00 |
| 175% | 63.64% | $275.00 |
| 200% | 66.67% | $300.00 |
| 225% | 69.23% | $325.00 |
| 250% | 71.43% | $350.00 |
| 275% | 73.33% | $375.00 |
| 300% | 75.00% | $400.00 |
The gap between the two numbers widens as markup grows. At a 5% markup they are 0.24 points apart. At 100% they are 50 points apart, and at 300% they are 225 points apart. The row to know for retail is 100%: Nebraska Extension notes that retail price is typically two times the wholesale price, a practice so common it is called keystone pricing, though high-end retailers and others may use other values.
Margin to Markup Chart (5% to 80%)
Going the other way, start with the margin you want and read the markup to add to your cost.
| Margin you want | Markup to add to cost | Price if the cost is $100 |
|---|---|---|
| 5% | 5.26% | $105.26 |
| 10% | 11.11% | $111.11 |
| 15% | 17.65% | $117.65 |
| 20% | 25.00% | $125.00 |
| 25% | 33.33% | $133.33 |
| 30% | 42.86% | $142.86 |
| 35% | 53.85% | $153.85 |
| 40% | 66.67% | $166.67 |
| 45% | 81.82% | $181.82 |
| 50% | 100.00% | $200.00 |
| 55% | 122.22% | $222.22 |
| 60% | 150.00% | $250.00 |
| 65% | 185.71% | $285.71 |
| 70% | 233.33% | $333.33 |
| 75% | 300.00% | $400.00 |
| 80% | 400.00% | $500.00 |
The markup you need climbs much faster than the margin. Moving from a 40% margin to 50% takes the markup from 66.67% to 100%, and moving from 70% to 80% takes it from 233.33% to 400%.
How to Price for a Target Margin
Divide your cost by 1 minus the margin you want. Do not multiply the cost by 1.40 for a 40% margin: that is a 40% markup, which gives only a 28.57% margin. Here are three examples, with prices rounded to the cent and each markup worked out from the exact price.
| Cost | Target margin | Calculation | Selling price | Profit | Same as a markup of |
|---|---|---|---|---|---|
| $12.00 | 40% | 12 / 0.60 | $20.00 | $8.00 | 66.67% |
| $45.00 | 30% | 45 / 0.70 | $64.29 | $19.29 | 42.86% |
| $250.00 | 55% | 250 / 0.45 | $555.56 | $305.56 | 122.22% |
The Markup Calculator does this from cost and margin (choose Cost and margin %), and the Profit Margin Calculator has a Find selling price mode. Use your full cost per item: materials or purchase price, inbound freight, packaging and any per-unit fees. A fee that is a percentage of the price, such as card processing, comes out of your margin instead. To keep a 30% margin after a 3% fee on an item that costs $50, price it at 50 / (1 - 0.30 - 0.03) = $74.63. The 3% is only an example. If you sell time instead of products, the same formulas apply to your hourly rate, and our freelance invoice guide covers how to bill it.
The Classic Mistake: A Markup Standing In for a Margin
Say your goal is a 30% margin and you add 30% to every cost. An item that costs $100 sells for $130, profit is $30, and the margin is $30 / $130 = 23.08%. Across $100,000 of sales that is $23,077 of gross profit instead of the $30,000 you planned, a shortfall of $6,923. That is 23.08% of your planned profit gone. Penn State Extension makes the same point about a farm market that adds a flat 30% to every product and expects a 30% margin: it loses almost a quarter of its gross profits. To really earn 30%, the markup has to be 0.30 / 0.70 = 42.86%, so the $100 item sells for $142.86.
The mix-up also happens across a negotiating table. A supplier who says "a 30% margin" and a buyer who hears "30% markup" will not agree on a price for an item that costs $70. A 30% margin is $70 / 0.70 = $100.00, while a 30% markup is $70 x 1.30 = $91.00. Always ask which base a percentage uses. Even official sources blur the words: IRS Publication 334 describes a retailer who marks up merchandise to realize a 33 1/3% gross profit on sales, then calls that figure the markup percentage. That is a margin on sales wearing a markup label.
How Discounts Eat Margin
A discount comes straight out of profit, so it hurts more than it looks. Take the $60 item that sells for $100, a 40% margin. At 20% off the price is $80, profit falls from $40 to $20, and the margin falls to $20 / $80 = 25%. Profit per unit has halved, so you must sell twice as many units to earn the same gross profit.
The general rule, with the original margin and the discount as decimals: extra units needed = margin / (margin - discount) - 1. Here 0.40 / (0.40 - 0.20) - 1 = 1.00, or 100% more units. The table applies it to common cases.
| Discount | 30% margin | 40% margin | 50% margin | 60% margin |
|---|---|---|---|---|
| 5% off | +20.0% | +14.3% | +11.1% | +9.1% |
| 10% off | +50.0% | +33.3% | +25.0% | +20.0% |
| 15% off | +100.0% | +60.0% | +42.9% | +33.3% |
| 20% off | +200.0% | +100.0% | +66.7% | +50.0% |
| 25% off | +500.0% | +166.7% | +100.0% | +71.4% |
| 30% off | Never | +300.0% | +150.0% | +100.0% |
| 35% off | Never | +700.0% | +233.3% | +140.0% |
The table assumes your cost per unit stays the same and the discount applies to every sale. "Never" means the discounted price is at or below cost. Discounts stack by multiplying, not adding: 20% off followed by 10% off is 28% off, not 30% (our guide to stacked discounts shows the math), and the Discount Calculator has a Two discounts tab for that. To see whether the extra volume is realistic against your fixed costs, run both prices through the Break-Even Calculator.
Typical Gross Margins by Industry
Public company data shows how wide the range is. This table comes from Margins by Sector (US) by NYU Stern professor Aswath Damodaran, which uses data as of January 2026 and was last updated that month. The last column converts each gross margin into the equivalent markup on cost.
| Sector | Firms | Gross margin | Operating margin (pre-tax) | Net margin | Gross margin as a markup on cost |
|---|---|---|---|---|---|
| Grocery and food retail | 15 | 26.31% | 2.29% | 1.32% | 35.7% |
| General retail | 23 | 33.18% | 6.80% | 5.61% | 49.7% |
| Specialty retail | 94 | 35.30% | 7.73% | 5.19% | 54.6% |
| Restaurants and dining | 64 | 32.24% | 15.79% | 9.37% | 47.6% |
| Apparel | 35 | 56.88% | 9.11% | 3.85% | 131.9% |
| Engineering and construction | 48 | 15.46% | 6.49% | 5.94% | 18.3% |
| Software (system and application) | 309 | 71.72% | 32.98% | 25.49% | 253.6% |
| All US companies in the dataset | 5994 | 37.76% | 12.82% | 9.74% | 60.7% |
Read it with care. These are sector totals for publicly traded US companies, with income and sales added up across firms, so large companies dominate and a small shop will differ. Gross margin also depends on what each company counts as cost of goods sold. Notice how much disappears further down the income statement: grocery and food retail averages a 26.31% gross margin but only 1.32% net margin, which leaves very little room for a pricing mistake.
Gross vs Operating vs Net Margin
Markup and margin charts describe gross margin: the share of the price left after the direct cost of the item. Your business also pays for wages, rent, marketing, interest and taxes, and each stage has its own margin. All three divide by revenue.
| Measure | Formula | What it subtracts from revenue | Example on $100,000 of sales |
|---|---|---|---|
| Gross margin | (Revenue - cost of goods sold) / Revenue | Only the direct cost of what you sold | $40,000 = 40% |
| Operating margin | Operating income / Revenue | Cost of goods plus overhead such as wages, rent and marketing | $12,000 = 12% |
| Net margin | Net income / Revenue | Everything, including interest and income taxes | $8,000 = 8% |
The example is illustrative. $60,000 of cost of goods leaves $40,000 of gross profit, $28,000 of overhead leaves $12,000 of operating income, and $4,000 of interest and taxes leaves $8,000 of net income. Damodaran defines net margin as net income / sales and pre-tax operating margin as EBIT / sales, and OpenStax defines the gross profit margin ratio as net sales minus cost of goods sold, divided by net sales. Gross margin has to cover everything below it. The Break-Even Calculator shows how many units you must sell at your price and cost per unit to cover your fixed costs. Margin is also not return on investment, which compares profit with the money you put in: see how to calculate ROI.
Frequently Asked Questions
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $40 cost sells for $60, and the $20 profit is 33.33% of the price. A 50% margin needs a 100% markup: the same $40 cost sells for $80, and the $40 profit is half the price.
Can profit margin be more than 100%?
Not for an item that has a cost. Margin is profit divided by price, and profit cannot be larger than the price unless the cost is negative, so gross margin stays below 100% and only approaches it as cost approaches zero. Margin goes negative when you sell below cost. Markup has no upper limit: a 300% markup is a 75% margin.
Do retailers quote margin or markup?
Both, and there is no single rule, so always ask which base a percentage uses. Retail prices are usually set by multiplying the wholesale price by a set percentage, which is a markup on cost, while income statements and industry benchmarks report margin as a share of sales. Some sources use the word markup for a percentage of sales: IRS Publication 334 does this in its gross profit example.
What markup do I need for a 40% margin?
A 66.67% markup, because 0.40 / (1 - 0.40) = 0.6667. Multiply your cost by 1.6667, or divide it by 0.60. A $12 cost sells for $20.00.
What is the difference between gross and net margin?
Gross margin subtracts only the direct cost of what you sold. Net margin subtracts every cost, including overhead, interest and taxes. On $100,000 of sales with $60,000 of cost of goods, the gross margin is 40%. After $28,000 of overhead and $4,000 of interest and taxes, the net margin is 8%. Markup and margin charts describe gross margin only.
Sources
Checked against these references:
- Penn State Extension, What's the Difference Between Markup and Profit?: a 30% markup is about a 23% margin
- Oregon State University Extension, EM 8921, Food Distribution Channel Overview (2006 archival copy), Appendix A: formulas, and a 25% markup giving a 20% margin
- University of Nebraska-Lincoln Extension, EC496, Introduction to Pricing for a Product or Service (2015): keystone pricing, a 100 percent markup
- IRS Publication 334 (2025), Tax Guide for Small Business, Testing Gross Profit Accuracy: the 33 1/3% gross profit example
- OpenStax, Principles of Accounting, Volume 1, section 6.6: gross profit margin ratio
- NYU Stern, Aswath Damodaran, Margins by Sector (US), January 2026: the industry table above
- NYU Stern, Damodaran Online, variable definitions: net margin and operating margin