Markup vs Margin: What’s the Difference and Why It Matters
Markup and margin are two financial terms that are often used interchangeably — but they mean very different things.
If you confuse them, you could accidentally underprice your products or overestimate your profitability.
In this guide, we’ll explain markup vs margin clearly, show examples, and provide an easy-to-use calculator to check your own numbers.
Quick Definitions
Markup:
The percentage added to the cost of a product to determine its selling price.
Margin:
The percentage of the selling price that is profit.
Markup vs Margin Example
Imagine you run a business selling T-shirts.
- Cost to produce one T-shirt = £10
- You sell the T-shirt for = £15
Calculations:
✅ Markup looks at the cost price.
✅ Margin looks at the selling price.
Markup vs Margin at a Glance
Why Understanding the Difference Matters
- Pricing Strategies:
If you use margin formulas thinking you’re applying markup, you might price too low and shrink profits. - Financial Reporting:
Margin is used more often when discussing profitability with accountants, investors, and lenders. - Business Health:
Knowing both lets you make smarter, more strategic decisions about costs, prices, and growth plans.
Interactive Markup vs Margin Calculator
Use this tool to calculate your markup, margin, or selling price:
Final Thoughts
Markup helps you set your prices.
Margin helps you measure your profits.
Both are essential — but they are not interchangeable.
Understand both. Use both. Grow smarter.
Master your pricing and profitability strategy with these key resources:
- Markup and Margin Formula Explained Simply (With Free Calculator) — Learn the exact formulas to calculate markup and margin easily.
- Mastering Pricing Strategy: How to Set Prices That Drive Profit Margins — Discover how understanding markup and margin improves your overall pricing strategy.
- Building a Pricing Strategy That Maximises Profit — Apply your margin knowledge to create a profitable and scalable pricing framework.
