Guide
Markup vs Margin Explained
They sound interchangeable — they aren't. Mixing them up is one of the fastest ways to under-price your products. Here's the simple difference, with UK examples.
The clear difference
Markup is the amount added on top of cost, expressed as a percentage of cost.
Margin is the profit kept, expressed as a percentage of the selling price.
Markup % = (Price - Cost) ÷ Cost × 100
Margin % = (Price - Cost) ÷ Price × 100
Real example: £30 cost → £50 price
Same product, two different percentages:
- Markup = (£50 - £30) ÷ £30 = 66.7%
- Margin = (£50 - £30) ÷ £50 = 40%
The profit is the same (£20). The percentage you call it depends on which number you divide by.
Quick conversion table
| Markup | Margin |
|---|---|
| 10% | 9% |
| 25% | 20% |
| 50% | 33% |
| 100% | 50% |
| 200% | 67% |
Conversion: Margin = Markup ÷ (1 + Markup)
Why businesses confuse them
Both are percentages. Both relate to the gap between cost and price. The trap is that "I make 50%" sounds like the same thing whether you mean markup or margin — but the gap between them grows fast.
A UK retailer who quotes a "50% margin" but applies it as a 50% markup is actually banking 33% margin. On £100,000 of revenue, that's £17,000 of profit silently disappearing.
When to use each
- Pricing decisions — markup. "Cost × 1.6" is fast and easy.
- Profitability analysis — margin. It's what actually lands in your bank.
- Comparing to competitors — margin. Industry benchmarks are almost always quoted as margin.
Common UK retail mistake
An ecommerce seller costs a product at £12 and wants "30% profit". They sell it for £15.60 (a 30% markup). The actual margin is only 23%. After fees and shipping, they're barely breaking even.
The fix: decide which number you want, calculate the price from there. Don't eyeball it.
Calculate yours properly
Use the Profit Margin Calculator to enter your cost and price and get margin instantly. For the full guide, see How to Calculate Profit Margin. And to find the unit volume that makes your business viable at that margin, try the Break-even Calculator.
Frequently asked questions
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a £30 cost gives a £45 selling price (£15 profit, 33% margin). A 50% margin on a £30 cost requires a £60 selling price (£30 profit). Markup is always larger than the equivalent margin.Which should small businesses use — markup or margin?
Use markup for pricing decisions ('cost × 1.5'), and margin for measuring profitability ('30% margin per sale'). Both are useful — they just answer different questions.How do I convert markup to margin?
Margin = Markup ÷ (1 + Markup). A 50% markup converts to a 33% margin. A 100% markup is a 50% margin.Where do UK businesses get this wrong?
The most common mistake is quoting a '30% margin' but applying it as a 30% markup, which leaves you with only a 23% margin. The shortfall destroys profit on high-volume products.