How it works
Margin vs. Markup Equations
Margin expresses profit as a fraction of selling price, whereas Markup expresses profit as a percentage added on top of your acquisition or production cost.
- 1Gross Profit = Selling Price - Cost of Goods Sold (COGS)
- 2Gross Margin % = (Gross Profit / Selling Price) × 100
- 3Markup % = (Gross Profit / Cost) × 100
- 4Required Price for Target Margin = Cost / (1 - Target Margin)
FAQ
Frequently asked questions
What is the difference between Margin and Markup?
Margin is the percentage of your selling price that is profit. Markup is the percentage added to your cost to arrive at that selling price. A 50% markup on a $100 item yields a $150 price, which is a 33.3% margin.
What is a healthy profit margin for a small business?
While margins vary by industry, retail and ecommerce typically aim for 40%–60% gross margins, service providers 50%–75%, and restaurants 65%–70% on food costs.
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