Pricing
Margin is not markup
A 50% markup is a 33% margin. Price from either one, and see the other.
Your costs stay yours. Nothing is stored, sent or logged.
What you know
What it means
The two formulas, and the mistake that costs real money
Margin is profit as a share of the selling price:
(price − cost) ÷ price. Markup is profit as a
share of the cost: (price − cost) ÷ cost. They describe
the same money and give different numbers, always.
Cost 40, price 60. Profit is 20. That is a 33.3% margin and a 50% markup. A business that means "I need a 40% margin" and applies a 40% markup prices at 56 instead of 66.67 — it has given away most of the margin it thought it had, on every unit, quietly.
Price from margin is cost ÷ (1 − margin), not
cost × (1 + margin). The second is the markup formula wearing
the wrong label, and it is the single most common pricing error in a small
business spreadsheet.
A margin of 100% or more is impossible: it would need an infinite price. Markup has no ceiling. VAT and sales tax are added after all of this and are not yours — they change what the customer pays and not what you make.
Questions people actually ask
The pricing questions that cost real money when they are answered wrong.
What is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is profit as a share of the cost. Cost 40 sold at 60 is a 33.3% margin and a 50% markup — the same money, two different numbers.
How do I calculate selling price from a target margin?
Price equals cost divided by (1 minus the margin). For a 40% margin on a cost of 40: 40 ÷ 0.6 = 66.67. Multiplying by 1.4 instead gives 56, which is the markup formula wearing the wrong label and the most common pricing error in a small business spreadsheet.
Can a margin be 100%?
No. Margin is a share of the price, so reaching 100% would need an infinite price. The tool says so rather than printing a number. Markup has no ceiling — a 300% markup is perfectly ordinary.
Where does VAT or sales tax fit?
On top of the selling price, after all the margin arithmetic. It changes what the customer pays and not what you make, so it is shown separately rather than folded into the margin.
Is my cost data sent anywhere?
No. What you pay your suppliers is commercially sensitive and there is no reason for it to leave the tab. Nothing is stored, sent or logged.
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