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Markup and margin are both ways to express profit, but they use different bases — and confusing them is one of the most common pricing mistakes in business.
Markup is calculated as a percentage of the cost price. If you buy a product for $100 and sell it for $150, your markup is 50% — because the $50 profit is 50% of the $100 cost.
Margin is calculated as a percentage of the selling price. That same $50 profit on a $150 sale gives you a margin of 33.3% — because $50 is 33.3% of $150.
The key takeaway: markup is always higher than margin for the same transaction. A 100% markup (doubling the price) gives you only a 50% margin. This distinction matters when setting prices, because targeting a 50% “margin” when you actually mean 50% “markup” would lead to significantly different selling prices.
| Markup % | Equivalent Margin % | Example ($100 cost) |
|---|---|---|
| 25% | 20% | Sell for $125, profit $25 |
| 50% | 33.3% | Sell for $150, profit $50 |
| 100% | 50% | Sell for $200, profit $100 |
| 200% | 66.7% | Sell for $300, profit $200 |
| 300% | 75% | Sell for $400, profit $300 |
The markup formula is straightforward:
To find the selling price from a known markup:
A clothing store buys a jacket wholesale for $60 and wants a 100% markup (keystone pricing). Selling price = $60 × (1 + 100/100) = $60 × 2 = $120. The profit is $60, and the margin is 50%.
A restaurant's food cost for a pasta dish is $4.50. With a 300% markup, the menu price = $4.50 × (1 + 300/100) = $4.50 × 4 = $18.00. The profit per dish is $13.50, with a 75% margin. This is typical for restaurants, where food costs run 25–35% of menu price.
A freelance designer hires a subcontractor at $80/hour and marks up the rate by 75% when billing the client. Client rate = $80 × (1 + 75/100) = $80 × 1.75 = $140/hour. The $60 per hour profit gives a 42.9% margin to cover overhead and profit.
Use this reference table as a starting point for pricing in your industry. Actual markups vary based on competition, location, and business model.
| Industry | Typical Markup | Equivalent Margin | Notes |
|---|---|---|---|
| Grocery / Supermarket | 5–25% | 5–20% | Low markup, high volume |
| Clothing / Apparel | 50–100% | 33–50% | Keystone markup (2×) is common |
| Restaurants | 200–400% | 60–80% | Food cost typically 25–35% |
| Electronics | 20–50% | 17–33% | Competitive margins |
| Jewelry | 100–300% | 50–75% | High perceived value |
| Furniture | 200–400% | 60–80% | Custom pieces even higher |
| Software / SaaS | 500–1000%+ | 80–95% | Near-zero marginal cost |
| Professional Services | 50–150% | 33–60% | Labor-intensive, variable |
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