Markup Percentage Calculator (and Margin vs Markup)
Markup is profit as a percentage of cost. Margin is profit as a percentage of price. They describe the same dollars but are different numbers, and mixing them up is one of the most common pricing mistakes in small business.
- Markup
- 25.0%
- Gross margin
- 20.0%
- Profit
- $20.00
How it works
Markup % = (Price - Cost) / Cost x 100, Margin % = (Price - Cost) / Price x 100
Enter what an item or job costs you and what you charge for it. The calculator returns markup (profit over cost), margin (profit over price), and the profit in dollars.
Because the denominators differ, markup is always the larger number. A 25% markup is only a 20% margin. Pricing to a target margin using the markup formula quietly underprices every job.
Worked example
Cost $80, price $100. Profit is $20. Markup = 20 / 80 = 25%. Margin = 20 / 100 = 20%.
Common markup to margin equivalents
| Markup | Margin |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 25% | 20.0% |
| 33% | 24.8% |
| 50% | 33.3% |
| 100% | 50.0% |
Frequently asked questions
- Is markup the same as margin?
- No. Markup divides profit by cost; margin divides profit by price. A 50% markup equals a 33.3% margin.
- How do I price for a target margin?
- Divide cost by (1 minus the target margin as a decimal). For a 40% margin on an $80 cost: 80 / 0.6 = $133.33.
- What markup should I use?
- It varies by industry and what the market bears. Work backwards from the net margin you need after overhead, then convert to markup with the table above.
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