Profit Margin vs. Markup: How to Calculate Both
Updated: October 2026. Rules and rates change; confirm with a professional or official source.
Margin and markup both describe profit, but they use different bases, and mixing them up is a common pricing mistake.
The formulas
Profit = price − cost. Margin = profit ÷ price. Markup = profit ÷ cost.
Example
An item costs $60 and sells for $100. Profit is $40. Margin is 40% ($40 ÷ $100). Markup is about 66.7% ($40 ÷ $60).
Which price for a target margin?
Divide cost by (1 − target margin). For a 40% margin on a $60 cost: $60 ÷ 0.60 = $100. A 40% markup would give only $84, a 28.6% margin.
Gross vs. net
These numbers ignore rent, wages, marketing and taxes. Your net margin is lower, so leave room.
Use the profit margin calculator.
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