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Markup and margin describe the same profit from different angles. A 50% markup is a 33.3% margin. A 100% markup is a 50% margin. They are never equal (except at 0%). Confusing them leads to pricing errors that destroy profitability. Here is the difference, the conversion table, and the formulas.
| Markup % | Margin % | Cost $60 → Sell Price | Profit |
|---|---|---|---|
| 10% | 9.1% | $66.00 | $6.00 |
| 20% | 16.7% | $72.00 | $12.00 |
| 25% | 20.0% | $75.00 | $15.00 |
| 33.3% | 25.0% | $80.00 | $20.00 |
| 40% | 28.6% | $84.00 | $24.00 |
| 50% | 33.3% | $90.00 | $30.00 |
| 75% | 42.9% | $105.00 | $45.00 |
| 100% | 50.0% | $120.00 | $60.00 |
| 150% | 60.0% | $150.00 | $90.00 |
| 200% | 66.7% | $180.00 | $120.00 |
| 300% | 75.0% | $240.00 | $180.00 |
Key insight: A 100% markup means you doubled the cost — but your margin is only 50%. Many business owners think a 50% markup gives them a 50% margin. It does not. A 50% markup gives a 33.3% margin.
A business owner wants a 40% profit on a $50 item:
| What They Mean | Formula | Selling Price | Actual Margin | Problem? |
|---|---|---|---|---|
| 40% markup | $50 × 1.40 | $70.00 | 28.6% | Only 28.6% margin — may not cover overhead |
| 40% margin | $50 / 0.60 | $83.33 | 40.0% | Correct — this is what they wanted |
The difference is $13.33 per item. On 1,000 units, that is $13,330 in lost profit — just from using the wrong formula.
| Industry | Typical Markup | Equivalent Margin |
|---|---|---|
| Grocery / Supermarket | 5-25% | 5-20% |
| Clothing Retail | 50-100% | 33-50% |
| Electronics | 20-50% | 17-33% |
| Furniture | 50-100% | 33-50% |
| Jewelry | 100-300% | 50-75% |
| Restaurant Food | 200-400% | 67-80% |
| Restaurant Drinks | 300-500% | 75-83% |
| Software (SaaS) | 80-90% margin | 400-900% markup |
| Cosmetics | 100-500% | 50-83% |
Markup and margin formulas calculate per-unit pricing. They do not account for overhead costs (rent, salaries, marketing), volume discounts, shipping costs, or returns. A product with a 50% margin (100% markup) may still be unprofitable if overhead costs exceed the total gross profit. Use markup/margin for unit pricing, then compare total gross margin against total overhead to determine actual profitability.
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