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Profit margin vs. markup: what is the difference?

Understand the two common profit percentages and avoid using one in place of the other.

8 min read · Reviewed August 27, 2026 · By the Clear Math Kit Editorial Team

Margin and markup both compare profit with another number, but they use different bases. Confusing them can produce a price that is lower than intended.

Margin uses revenue as the base

Profit margin is (revenue − cost) ÷ revenue × 100. If an item sells for $100 and costs $60, profit is $40 and margin is 40%.

Markup uses cost as the base

Markup is (selling price − cost) ÷ cost × 100. With the same $100 price and $60 cost, markup is $40 ÷ $60 × 100, or about 66.67%.

Convert a target margin into a price

To price for a target margin, divide cost by one minus the margin decimal. A $60 cost with a 40% target margin gives $60 ÷ 0.60 = $100.

Define which costs are included

A simple calculator may use direct cost only. Real business decisions can also involve shipping, payment fees, labor, overhead, returns, and tax. State the cost definition alongside the percentage.

Try the numbers yourself

A calculator is often the quickest way to check your mental math. The important part is using the right starting value.

Open a calculator →

Common questions

Is a 50% markup the same as a 50% margin?

No. A 50% markup corresponds to a 33.33% margin.

Can margin exceed 100%?

A standard positive-cost profit margin normally cannot exceed 100%, while markup can.

Which one should a report use?

Use the measure your organization defines, label it clearly, and apply it consistently.

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