Markup and Margin Formula Explained Simply (With Free Calculator)
Markup and margin are two sides of the same coin — but they’re calculated differently and used for different purposes.
In this guide, we’ll break down each formula clearly, show practical examples, and provide a free interactive calculator to check your numbers instantly.
Quick Definitions
- Markup: How much you add to your cost price to set your selling price.
- Margin: The percentage of your selling price that is profit.
✅ Both are crucial for pricing products properly and understanding business profitability.
Markup Formula
Markup (%) = ((Selling Price - Cost Price) ÷ Cost Price) × 100
Or simply:
Markup is profit divided by cost.
Example
- Cost Price = £50
- Selling Price = £75
Calculation:
✅ You applied a 50% markup.
Margin Formula
Margin (%) = ((Selling Price - Cost Price) ÷ Selling Price) × 100
Or simply:
Margin is profit divided by selling price.
Example
- Cost Price = £50
- Selling Price = £75
Calculation:
✅ Your margin is 33.33%.
Markup vs Margin Quick Comparison
✅ Different perspective — same underlying numbers!
Why Markup and Margin Formulas Matter
- Pricing Accuracy: Ensures you’re building in the right level of profit.
- Financial Reporting: Investors, lenders, and internal managers look at margins, not just markups.
- Profit Protection: Misunderstanding formulas can lead to underpricing — and eroded profits.
Free Markup and Margin Calculator
Use this tool to calculate markup, margin, or selling price easily:
Final Thoughts
Markup and margin may seem similar — but mastering the formulas behind them is vital for running a profitable, sustainable business.
Markup sets your prices.
Margin protects your profits.
Learn the difference. Apply the formulas correctly. Price smarter.
Take your pricing skills even further with these essential guides:
- Markup vs Margin: What’s the Difference and Why It Matters — Clarify the differences between markup and margin before applying the formulas.
- Business Markup Calculator UK: Simple Tool for Pricing and Profit — Use our free calculator to quickly apply your markup and margin knowledge.
- Mastering Pricing Strategy: How to Set Prices That Drive Profit Margins — Learn how mastering these formulas feeds into a powerful, profit-driven pricing strategy.
