You’ve worked out what a product costs you, and now you need a price. One person says to add a 50% markup, a pricing guide says to aim for a 50% margin, and those two numbers sound like the same thing. They aren’t. Markup vs margin is the difference between measuring profit against what you paid and measuring it against what the customer paid, and mixing them up is one of the easiest ways to underprice a product without noticing.
Markup is profit as a percentage of cost. Margin is profit as a percentage of the selling price. Both use the same dollars of profit; only the denominator changes. An item that costs $10 and sells for $25 makes $15 of profit: that’s a 150% markup ($15 ÷ $10) and a 60% margin ($15 ÷ $25).
What’s the difference between markup and margin?
The difference between markup and margin is the number you divide by. Profit (price minus cost) is the same in both. Markup divides it by cost. Margin divides it by selling price. Because the price is always bigger than the cost on a profitable item, margin is always the smaller percentage.
| Markup | Margin | |
|---|---|---|
| Measures profit against | Cost | Selling price |
| Formula | (Price − Cost) ÷ Cost | (Price − Cost) ÷ Price |
| Can it go above 100%? | Yes, with no upper limit | No, it stays below 100% |
| Answers the question | “How much do I add to my cost?” | “How much of each sale do I keep?” |
| Common in | Retail and wholesale pricing | Financial reporting and performance checks |
That last row matters more than it looks. Markup is a pricing tool: you start from cost and build up. Margin is a results tool: you start from revenue and see what’s left. In this post, “margin” means gross margin, which is profit after the cost of the product itself, unless we say otherwise.
Markup vs margin formulas
Here are the two formulas, written the way you’d type them into a spreadsheet.
- Markup % = (Selling price − Cost) ÷ Cost × 100
- Margin % = (Selling price − Cost) ÷ Selling price × 100
And the two you use to set a price:
- Price from a markup = Cost × (1 + Markup)
- Price from a target margin = Cost ÷ (1 − Margin)
The second pair is where people slip. To get a 50% markup on a $10 item you multiply: $10 × 1.5 = $15. To get a 50% margin you divide: $10 ÷ 0.5 = $20. Same “50%,” a $5 gap in price. If you’d rather not do the division by hand, our markup calculator works from cost and markup and shows the margin alongside it.
A markup vs margin example: one product, worked both ways
Take a product that costs $10 to make and sells for $25.
- Profit: $25 − $10 = $15
- Markup: $15 ÷ $10 = 1.5, so 150%
- Margin: $15 ÷ $25 = 0.6, so 60%
Now run it backward to check. Starting from cost with a 150% markup: $10 × (1 + 1.5) = $25. Starting from cost with a 60% margin: $10 ÷ (1 − 0.6) = $10 ÷ 0.4 = $25. Both roads land on the same price, which is the point: markup and margin are two descriptions of one price, not two different prices.
A quick way to sanity-check any pair: a markup of 100% always equals a margin of 50%, because doubling your cost means half the price is profit. If someone quotes you a margin above 50% with a markup under 100%, one of the numbers is wrong.
Markup vs margin chart: convert one to the other
Two formulas convert between them. Write the percentages as decimals (25% = 0.25).
- Margin = Markup ÷ (1 + Markup)
- Markup = Margin ÷ (1 − Margin)
Example: a 25% markup is 0.25 ÷ 1.25 = 0.20, a 20% margin. A 20% margin is 0.20 ÷ 0.80 = 0.25, a 25% markup. Every value in this markup to margin table comes from those two formulas, rounded to two decimals.
| Markup | Margin | Margin | Markup | |
|---|---|---|---|---|
| 10% | 9.09% | 10% | 11.11% | |
| 20% | 16.67% | 20% | 25% | |
| 25% | 20% | 25% | 33.33% | |
| 30% | 23.08% | 30% | 42.86% | |
| 40% | 28.57% | 40% | 66.67% | |
| 50% | 33.33% | 50% | 100% | |
| 60% | 37.5% | 60% | 150% | |
| 75% | 42.86% | 70% | 233.33% | |
| 100% | 50% | 75% | 300% | |
| 150% | 60% | 80% | 400% | |
| 200% | 66.67% | |||
| 300% | 75% |
Notice how the right-hand columns run away. Moving from a 70% margin to an 80% margin takes the markup from 233% to 400%. That’s why margin can never reach 100% (it would mean the item cost nothing), while markup has no ceiling at all.
Why mixing up markup and margin underprices your products
The mix-up nearly always goes the same direction: a seller wants a certain margin but applies that number as a markup. Because markup uses the smaller base (cost), the price comes out too low.
Say you want a 50% margin on a $10 item. The correct price is $10 ÷ 0.5 = $20. If you add a 50% markup instead, you charge $15. Your actual margin is $5 ÷ $15 = 33.3%, and you’ve left $5 on every sale. Sell 200 of them and that’s $1,000 you meant to earn and didn’t.
The gap gets wider as the target goes up. A 60% margin target applied as a 60% markup on a $10 cost gives $16 instead of $25, a $9 shortfall per item. This is the mechanism behind “I’m busy but not making money”: the percentage looks healthy, but it’s measured against the wrong base.
In practice, the slip rarely shows up as a math error. It shows up as a rule of thumb copied from one context into another. A wholesale buyer talks in markups, a business coach talks in margins, and the seller uses whichever number they heard last. Writing both percentages next to every product price is the simplest fix.
Margin vs markup: which to use for retail, wholesale, and reporting
In the margin vs markup choice, both numbers are correct; they just answer different questions.
Use markup when you’re setting prices from cost. Retail and wholesale pricing runs on markup because it’s one multiplication. “Keystone” pricing in retail means doubling the wholesale cost, a 100% markup. A maker who sells wholesale at twice their cost, and whose stockist doubles that again, is working in markups at both steps. Markup is also handy for quoting: “cost plus 30%” is easy to explain to a client.
Use margin when you’re measuring results. Gross margin is how an income statement shows profitability: gross profit divided by revenue. It’s the number to compare across products, months, or businesses of different sizes, because it’s always a share of sales. Lenders, accountants, and most small-business planning templates ask for margin, not markup.
Use both when you sell on a marketplace. Price with markup, then check the margin after fees. That second step is where most of the surprises are, as the next example shows.
A small-seller example with Etsy fees
Here’s a candle that costs $8 in wax, wick, jar, fragrance, and packaging. The buyer pays $5 for shipping, and the label costs you $5. The shop sells on Etsy in the US. As of October 2026, Etsy charges a $0.20 listing fee, a 6.5% transaction fee on the item price plus shipping, and, per Etsy’s payment processing fee page, 3% + $0.25 on the order total for US shops. To keep the math clean, this example assumes no sales tax on the order and no Offsite Ads sale; both would add to the fees.
Three ways to price it, with margin measured as profit after fees and shipping, divided by the item price (Etsy fees rounded to the cent):
| Pricing approach | Item price | Etsy fees | Profit | Real margin |
|---|---|---|---|---|
| 60% markup (the mix-up) | $12.80 | $2.14 | $2.66 | 20.8% |
| 60% margin, ignoring fees | $20.00 | $2.83 | $9.18 | 45.9% |
| 60% margin, fee-aware | $29.50 | $3.73 | $17.77 | 60.2% |
How the middle row works: the order total is $25 ($20 + $5 shipping). Fees are $1.625 transaction (6.5% × $25), $1.00 processing (3% × $25 + $0.25), and the $0.20 listing fee, $2.825 in all. Profit is $25 − $5 label − $2.825 fees − $8 cost = $9.175, about $9.18, which is 45.9% of $20. The “60% margin” price delivered under 46% once Etsy took its share.
To price for a margin after fees, put the fees into the formula:
Price = (Cost + fixed fees + fees on shipping) ÷ (1 − target margin − percentage fees)
For this candle: cost $8, fixed fees $0.45 ($0.20 listing + $0.25 processing), and fees on the $5 shipping of $0.475 (9.5% × $5), so the top is $8.925. The bottom is 1 − 0.60 − 0.095 = 0.305, where 9.5% is the 6.5% transaction fee plus the 3% processing fee. Price = $8.925 ÷ 0.305 ≈ $29.26, which we rounded up to $29.50.
The general lesson holds on any platform: percentage fees come out of the price, so they eat into margin directly. A 9.5% fee load means a 60% gross margin target needs the price to work as though you were aiming for 69.5%. Our Etsy fees breakdown covers the other charges, including Offsite Ads, that can push the number higher.
Markup vs margin in your pricing system
Markup and margin aren’t competing methods. Markup is how you get from cost to price quickly; margin is how you check that the price actually leaves enough. Keep three habits: write both percentages next to each price, convert with margin = markup ÷ (1 + markup) before you trust a rule of thumb, and always re-check margin after platform fees. If you’re pricing handmade work from scratch, remember that labor and overhead belong in the cost before either percentage is applied.
For a fast check on any product, plug cost, price, and fees into our profit margin calculator. To keep every product’s costs and prices in one place as your range grows, the Handmade Pricing Calculator & Inventory Tracker builds wholesale and retail prices from your real material costs.
Questions people ask
What is the difference between 30% margin and 30% markup?
A 30% markup adds 30% of the cost to get the price, so a $100 item sells for $130 and the margin is only 23.1%. A 30% margin means profit is 30% of the price, so the same $100 item has to sell for $142.86, which is a 42.9% markup.
Is 20% margin the same as 25% markup?
Yes. They describe the same price. An item that costs $80 and sells for $100 makes $20 of profit. That $20 is 25% of the $80 cost (markup) and 20% of the $100 price (margin). Use margin = markup ÷ (1 + markup) to check: 0.25 ÷ 1.25 = 0.20.
Is a 50% margin a 100% markup?
Yes. Doubling the cost is a 100% markup, and it gives a 50% margin. A $10 item sold for $20 makes $10 of profit, which is 100% of the cost and 50% of the price. In retail this is called keystone pricing.
Should I use markup or margin?
Use markup when you set prices from your cost, because it's quick: cost × (1 + markup). Use margin when you check results, compare products, or read financial statements, because it shows how much of each sales dollar you keep. Most small sellers price with one and check with the other.
How much margin is 20% markup?
A 20% markup gives a 16.67% margin. On a $50 cost, a 20% markup makes the price $60 and the profit $10. That $10 is 20% of the cost but only 16.67% of the $60 price. Margin is always lower than markup on a profitable item.
How do you calculate markup percentage?
Subtract the cost from the selling price, divide by the cost, and multiply by 100. For an item that costs $10 and sells for $25: ($25 − $10) ÷ $10 = 1.5, so the markup is 150%. If you know the margin instead, markup = margin ÷ (1 − margin).
What is a 25% markup on $100?
A 25% markup on a $100 cost is $25, so the selling price is $125. The profit of $25 is 25% of the cost, but it's 20% of the $125 price, so the margin is 20%.
