Markup and margin are not the same number
Both describe the profit on an item. The difference is what you divide that profit by. Markup compares profit to what the item cost you. Margin compares profit to what you sell it for. Because the selling price is always bigger than the cost (if you're making money), the margin on an item is always a smaller percentage than its markup.
Example. A can of energy drink costs you $1.20 and sells for $1.99. You make $0.79 on each one.
Markup: $0.79 ÷ $1.20 = 65.8%
Margin: $0.79 ÷ $1.99 = 39.7%
Same can, same 79 cents, two very different percentages.
Why mixing them up costs money
Say you want a 40% margin on that $1.20 can, and you price it by adding 40% to the cost. That gives you $1.68. But $1.68 is only a 28.6% margin. You meant to keep 40 cents of every dollar and you're keeping about 29.
To actually hit a 40% margin, divide the cost by 0.60 (that's 1 minus 0.40). $1.20 ÷ 0.60 = $2.00. At $2.00 you keep $0.80, which is 40% of the price.
The gap gets wider as the numbers get bigger. A 50% markup is only a 33.3% margin, and a 100% markup (doubling the cost) is a 50% margin.
The formulas
To convert one to the other:
Markup to margin conversion table
Find the margin you want in the right column to see the markup it takes to get there.
| Markup | Margin |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 33.3% | 25.0% |
| 40% | 28.6% |
| 50% | 33.3% |
| 60% | 37.5% |
| 66.7% | 40.0% |
| 75% | 42.9% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
Which one should you use?
Use whichever matches the number you're comparing against. Your profit and loss statement reports gross margin (gross profit as a share of sales), and most industry figures and distributor sell sheets talk in margin too. Markup is handy when you're working forward from an invoice cost and want a quick multiplier. The mistake is only in switching between them without converting.
Common questions
- Can margin be more than 100%?
- No. Margin is profit as a share of the selling price, and profit can never be larger than the price itself. It gets close to 100% only when an item costs you almost nothing. Markup has no ceiling: an item that costs $1 and sells for $5 has a 400% markup and an 80% margin.
- What does a negative margin mean?
- You're selling below cost. That's sometimes on purpose, as with a loss leader that brings people in, but it's worth knowing exactly how much each sale costs you.
- Should rebates and discounts be included?
- This calculator uses whatever cost you enter. If you get an off-invoice discount or a per-unit rebate you're sure to receive, subtract it from the cost first. If you'd rather be conservative, leave rebates out and treat them as a bonus when they arrive. To work from a full case invoice, use the case cost calculator.
- What's a good margin for a convenience store item?
- It depends heavily on the category. Fuel and tobacco typically run thin margins, while fountain drinks, coffee and prepared food usually run much higher. Compare an item against its own category rather than against the store as a whole.
Last updated October 11, 2026.