Margin vs markup: worked examples for common percentages
See why a 50% markup is not a 50% margin and how to convert between the two when pricing.
Margin and markup use different denominators. Markup compares profit with cost; margin compares profit with selling price. Confusing them can lead to materially different prices.
A 50% markup example
If cost is 100 and you add a 50% markup, the selling price becomes 150 and gross profit is 50.
The margin is 50 divided by 150, which is 33.33%, not 50%.
A 50% margin example
To earn a 50% gross margin on a cost of 100, the selling price must be 200. Gross profit is then 100, which is half of the selling price.
This corresponds to a 100% markup on cost.
Use the metric your business actually manages
Retail, distribution and service businesses may discuss pricing with different metrics. Label reports and calculators clearly.
Neither gross margin nor markup equals final net profit because operating expenses, finance costs and taxes may remain.
This guide provides general educational information and is not legal, accounting, tax or financial advice. Requirements vary by country, industry and transaction. See how Docuivo tests its tools and calculations.