Examples · Money · updated 2026-09-26

Margin vs. markup: what's the difference?

A product costs 80 and sells for 100, so the gross profit is 20. Margin divides that 20 by the selling price: 20%. Markup divides the same 20 by the cost: 25%. Same profit, different base. Change the cost and the selling price on the board below and check.

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You can change the numbers here too, but changes made in this frame are not saved. To keep them, open it in CalcAnyway and edit there.

The left column is the cost, the gross profit and the selling price, top to bottom. On the right, the markup sits next to the cost and the margin next to the selling price; both come from the same gross profit. To keep the comparison clean, the example uses nothing but a cost and a selling price.

The profit is 20 either way

Cost 80, selling price 100: the gross profit is 100 − 80 = 20. Both percentages start from this same number.

Margin is 20%

Margin asks what share of the selling price is profit: 20 ÷ 100 = 20%. The selling price, 100, counts as 100%.

Markup is 25%

Markup asks how much was added on top of the cost: 20 ÷ 80 = 25%. The cost, 80, counts as 100%.

The same profit of 20 is divided by 100 in one case and by 80 in the other — hence 20% and 25%. Both are correct; they just measure against different bases.

The same "20%" gives different prices

Now go the other way and set a price from a percentage. Keep the cost at 80 and aim for 20%.

Open in CalcAnyway ↗

You can change the numbers here too, but changes made in this frame are not saved. To keep them, open it in CalcAnyway and edit there.

On this board the left column sets the price from a margin and the right column from a markup. Each also shows the other percentage at the price it arrives at.

A 20% markup adds 20% to the cost: 80 × 1.2 = 96. The profit is 16, so the margin at that price is 16 ÷ 96 = 16.666667% (about a sixth).
A 20% margin makes profit 20% of the selling price. The cost is then 80% of the price, so the price is 80 ÷ 0.8 = 100. The profit is 20, and the markup at that price is 25%.

Same "20%": a 20% margin means 100, a 20% markup means 96. When someone says "add 20%", which one they mean changes the price.

Try it yourself

Keep the cost at 80 and set the selling price to 100, 120 and 160.

100 — profit 20, margin 20%, markup 25%
120 — profit 40, margin 33.333333% (about a third), markup 50%
160 — profit 80, margin 50%, markup 100%

With the cost fixed at 80, the higher the selling price, the further apart the two percentages get.

Then, on the second board, set Target margin and Target markup both to 20%. The prices split into 100 and 96. Set both to 50% and the gap is even clearer:

A 50% markup — price 120, margin at that price 33.333333%
A 50% margin — price 160, markup at that price 100%

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