Master Your Pricing Strategy
Margin vs. Markup: What's the Difference?
While often used interchangeably, margin and markup are completely different metrics that show profit from two different angles.
- Margin (Gross Margin): Profit shown as a percentage of Revenue. A $50 cost sold for $100 yields a $50 profit, which is a 50% margin.
- Markup: Profit shown as a percentage of Cost. That same $50 profit on a $50 cost is a 100% markup.
Confusing the two can lead to pricing errors and lost revenue. Our calculator computes both simultaneously to ensure perfect accuracy.
How to use this calculator
- Scenario A (Finding Profit): Enter your Item Cost and your Selling Price. The calculator will instantly reveal your Profit, Margin, and Markup.
- Scenario B (Setting a Price): Enter your Item Cost, then adjust the "Target Gross Margin" slider. The calculator will instantly tell you exactly what your Selling Price must be to hit that margin.
Frequently Asked Questions
No, Gross Margin can never exceed 100%, because the profit can never be greater than the revenue itself (since Revenue = Cost + Profit). However, Markup can easily exceed 100% if the profit is higher than the original cost (e.g., buying for $10 and selling for $30 is a 200% markup).
A "good" margin depends heavily on the industry. A typical grocery store might operate on razor-thin margins (1-3%), while software/SaaS companies frequently enjoy gross margins of 70-90%. Generally, a 10% net margin is considered average, 20% is considered high, and 5% is low across mixed industries.