Markup measures profit relative to cost; margin measures the same profit relative to selling price. The calculator below converts a cost-based markup percentage into its equivalent revenue-based margin.
Open the Markup to Margin Calculator.
Markup vs margin: the denominator changes the answer
For a transaction with a stated selling price and included cost, first subtract cost from price. Then decide which denominator answers your question. Divide the difference by cost for markup, or by selling price for margin.
Markup = (price − cost) ÷ cost × 100.
Margin = (price − cost) ÷ price × 100.
Suppose an item has an included cost of $80 and sells for $120. The difference is $40. Markup is $40 ÷ $80 = 50%. Margin is $40 ÷ $120, approximately 33.33%. There is one $40 difference, expressed against two different bases.
The Business Victoria pricing guide distinguishes markup from margin. Before comparing either figure across products, define the costs included in the calculation. A gross product margin is not automatically a business’s final net profit margin.
The distinction matters whenever someone requests “a 30% profit.” That phrase does not say whether the intended denominator is cost or revenue. Ask for a cost markup or a sales margin in the pricing specification, then use the corresponding equation.
Convert markup to margin with the calculator
If markup is entered as a percentage number, the relationship is:
Margin percentage = markup percentage ÷ (100 + markup percentage) × 100.
For a 50% markup, enter 50 in the embedded calculator. It divides 50 by 150 and multiplies by 100, producing approximately 33.33% margin. Enter the percentage number, not its decimal fraction: 50 represents 50%, whereas 0.5 represents a markup of only half a percent.
You can derive the relationship from a convenient cost of $100. A markup of 50% adds $50, creating a $150 selling price. Profit is therefore 50 out of 150, rather than 50 out of 100. The arbitrary $100 cost makes the proportions visible; it does not restrict the formula to $100 products.
The tool converts percentages only. It has no fields for discounts, tax, fixed expenses, or transaction fees. If your actual price has been discounted or your cost base has changed, calculate the actual markup first and convert that revised percentage.
A conversion cannot repair an incorrect starting percentage. For example, a quoted “50% markup” based on an old supplier cost may no longer describe the item after a cost increase. Use the current documented figures before interpreting the output.
Compare equivalent pricing percentages
The table assumes a positive cost base and a selling price above cost. It contains mathematical equivalents, not recommended targets for a particular trade.
| Markup on cost | Price when cost is $100 | Difference above cost | Margin on sales |
|---|---|---|---|
| 10% | $110 | $10 | 9.09% |
| 25% | $125 | $25 | 20% |
| 50% | $150 | $50 | 33.33% |
| 75% | $175 | $75 | 42.86% |
| 100% | $200 | $100 | 50% |
| 200% | $300 | $200 | 66.67% |
As positive markup rises, margin also rises, but not by the same number of percentage points. A 100% markup means doubling cost. It produces a 50% margin because half the selling price still pays for the included cost.
With a positive cost and finite selling price, this simple model cannot reach a 100% margin. The cost remains a positive part of revenue. Statements about “100% profit” therefore need a definition rather than an assumption that markup and margin are interchangeable.
Do not average the percentages in this table to estimate a portfolio result. Products with different cost and revenue weights contribute differently. Add actual included costs and proceeds first, then calculate the combined ratio from those totals.
Set a selling price for a target margin
To calculate price from a desired margin, subtract the margin fraction from one and divide cost by the remainder:
Price = included cost ÷ (1 − desired margin fraction).
For an $80 cost and a 40% target margin, price is $80 ÷ 0.60, approximately $133.33 before final currency rounding. Multiplying $80 by 1.40 would produce $112, which is a 40% markup rather than a 40% margin.
At a $112 price, the difference is $32. Dividing $32 by $112 gives approximately 28.57% margin. That gap can be substantial when the price is supposed to cover other business expenses.
To convert a desired margin back to markup, use markup percentage = margin percentage ÷ (100 − margin percentage) × 100. A 40% margin corresponds to approximately 66.67% markup. Entering that markup in the embedded tool verifies the equivalent margin, allowing for rounded input precision.
These formulas assume that the stated cost does not itself change with selling price. If a processor charges a percentage of revenue, its fee needs a separate term. Simply adding a guessed fixed fee to cost may not produce the requested margin once the final price changes. Recalculate the percentage after selecting the final currency-rounded price so the advertised figure and the internal pricing record describe the same transaction.
Check discounts against the actual selling price
Consider the earlier $80 cost and $120 list price. Before discounts, the transaction has a 50% markup and approximately 33.33% margin. A 10% discount reduces price to $108 while the included cost stays at $80.
The remaining difference is $28. Actual markup becomes $28 ÷ $80 = 35%. Actual margin becomes $28 ÷ $108, approximately 25.93%. The original 50% markup no longer describes the discounted sale.
A 10% price discount has reduced the $40 difference by $12, or 30%. This example holds cost and quantity constant. A promotion could change sales volume, returns, or fulfillment costs, but those changes require their own evidence or stated scenarios.
The Business Queensland pricing guidance discusses pricing approaches and the importance of understanding included costs. Use the arithmetic to make the commercial assumptions visible, rather than treating a desired percentage as proof that a price will succeed.
For tax-inclusive receipts, first identify the amount that is business revenue under the relevant treatment. A collected tax amount should not be mistaken for extra product profit. Apply a consistent tax basis to the cost and selling-price comparison.
Keep the cost boundary and labels with the result
A product cost might include only its purchase price, or it might include allocated freight, production labor, and other categories. Both a markup and a margin can be calculated on either stated boundary, but the labels must explain what remains to be paid.
For example, an $80 cost excluding delivery and a $120 selling price leave $40 before delivery. If actual delivery adds $8 to the included cost, the difference becomes $32. Markup on the revised $88 cost is approximately 36.36%, while margin on $120 revenue is approximately 26.67%.
Do not describe the initial $40 as final net profit if more expenses remain. Also avoid moving shared overhead between categories solely to make a product comparison look better. A consistent boundary is necessary for meaningful trends.
Zero cost makes cost-based markup undefined, while zero revenue makes revenue-based margin undefined. The embedded converter is designed for nonnegative markup inputs; use an actual price-and-cost reconciliation for loss-making transactions instead of forcing them into an unsupported input range.
When sharing a pricing decision, write the included cost, actual tax-exclusive price, resulting profit amount, and denominator beside each percentage. “50% markup on $80 cost; 33.33% margin on $120 revenue” is specific enough to prevent the two measures being confused later.