Margin or Markup? The Difference Explained Simply
Many prices go wrong because margin and markup get mixed up. Both describe profit, but from different starting points.
The formulas
- Markup = (selling price − purchase price) ÷ purchase price
- Margin = (selling price − purchase price) ÷ selling price
- Selling price from markup = purchase price × (1 + markup)
- Selling price from margin = purchase price ÷ (1 − margin)
Example
You buy for 20 € and sell for 30 € net. Profit before costs is 10 €. That is a 50% markup but only a 33.3% margin.
Conversion
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 300% | 75% |
Typical mistakes
- Forgetting fees and packaging: real profit is smaller than the calculation before costs.
- Mixing gross and net. VAT is not profit.
- Entering a target margin as markup (or the other way around).
General calculation aid, not tax or legal advice. All prices are net unless labeled gross. Updated: November 2026