What's the difference between margin and markup?

Margin divides profit by the selling price; markup divides the same profit by the cost. They describe the same transaction but are never the same number — a 100% markup is only a 50% margin, which is the most common pricing mistake this tool is built to catch.

Should I include shipping or payment processing fees in the cost?

This calculator treats "cost" as the direct unit cost only, as stated in the assumptions. If shipping or processing fees apply to every sale, add them into the unit cost figure you enter so the margin reflects your actual take-home profit.

Why does a 20% discount cut my margin by more than 20%?

Because the discount comes off the price, but your cost stays fixed — so the same absolute cost is now being divided into a smaller number. The discount table below the result shows exactly how much margin a given discount removes for your own cost and price.

Profit Margin Calculator

Calculate gross margin, markup, and the price needed to hit a target margin.

Runs entirely in your browser — nothing you enter is uploaded.

What do you want to work out?

Margin from a known pricePrice for a target margin

Unit cost

Direct cost only, excluding overheads

Selling price

Net of sales tax

Why these two numbers differ

The profit is £60.00 either way. Dividing it by the £100.00 price gives a margin of 60.0%. Dividing the same profit by the £40.00 cost gives a markup of 150.0%. Quoting one when you meant the other is how products get underpriced.

What discounting does to the margin

Discount	Price	Profit	Margin
0%	£100.00	£60.00	60.0%
10%	£90.00	£50.00	55.6%
20%	£80.00	£40.00	50.0%
30%	£70.00	£30.00	42.9%

Gross margin

60.0%

Selling price£100.00

Gross profit£60.00

Margin60.0%

Markup150.0%

Gross margin only. Overheads, salaries and marketing are not deducted.

How to use Profit Margin Calculator

Choose whether you want to work out a margin from a known price, or a price for a target margin.
Enter the unit cost — the direct cost of the item, excluding overheads.
Enter either the selling price or your target margin, depending on the mode you chose.
Read the margin, markup and profit figures on the right.
Check the discount table further down to see how much a discount actually erodes your margin.

How this works

Margin and markup describe the same gap between cost and price, but divide it by different things. Margin divides profit by the selling price and answers what proportion of revenue you keep. Markup divides profit by the cost and answers how far you raised the price above what you paid. Mixing them up is one of the most common and expensive pricing errors, because a 50% markup is only a 33.3% margin.

margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost; price for target margin = cost ÷ (1 − margin)

Assumptions

Cost means the direct cost of the unit sold. Overheads, salaries, rent and marketing are excluded — this is gross margin, not net.
Prices are taken net of sales tax or VAT.
Discounts, returns, shrinkage and payment processing fees are not deducted.

Worked example

An item costing £40, sold at £100.

Unit cost: £40
Selling price: £100
Result: 60% margin, 150% markup

The £60 profit is 60% of the £100 price but 150% of the £40 cost. Both describe the same transaction. If you instead wanted a 60% margin from a £40 cost, the price is £40 ÷ (1 − 0.6) = £100 — which is where the reverse calculation is useful.

How to read the result

Use margin when you are thinking about revenue and profitability, and markup when you are setting prices upward from cost. If you discount, remember the margin falls faster than the discount suggests: a 20% discount on a 40% margin product cuts the margin to 25%, meaning you must sell substantially more units to earn the same gross profit.

Limitations

Gross margin only — it says nothing about whether the business is profitable overall once fixed costs are covered.
Ignores volume. A high margin on very few sales can be worse than a thin margin at scale.
Sales tax treatment varies by jurisdiction; check whether your figures are inclusive or exclusive before comparing.

Frequently asked questions

What's the difference between margin and markup?: Margin divides profit by the selling price; markup divides the same profit by the cost. They describe the same transaction but are never the same number — a 100% markup is only a 50% margin, which is the most common pricing mistake this tool is built to catch.
Should I include shipping or payment processing fees in the cost?: This calculator treats "cost" as the direct unit cost only, as stated in the assumptions. If shipping or processing fees apply to every sale, add them into the unit cost figure you enter so the margin reflects your actual take-home profit.
Why does a 20% discount cut my margin by more than 20%?: Because the discount comes off the price, but your cost stays fixed — so the same absolute cost is now being divided into a smaller number. The discount table below the result shows exactly how much margin a given discount removes for your own cost and price.