Markup is profit divided by cost. Margin is profit divided by selling price. The same profit always produces a higher markup percent than margin percent.
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A markup calculator turns your cost and a target markup percentage into a selling price, or works backward from a known cost and price to tell you the markup you actually applied, along with the equivalent margin.
Markup divides profit by cost. Margin divides the same profit by selling price. Since selling price is always larger than cost, margin is always a smaller percentage than markup for the same dollar profit. A 40% markup on a $50 cost item produces a $70 price and $20 profit, which works out to a 28.6% margin, not 40%. Mixing the two up is one of the most common pricing mistakes in retail and services alike.
Your markup needs to cover more than the unit cost. Overhead, payment processing fees, returns, and your target profit all have to be baked into the percentage you choose, or the number on this calculator will look fine while the business underneath is not. Many retailers set a standard markup by category, then flex individual prices up or down based on competition and how much value customers place on the item.
Neither number tells the whole story alone. Markup is useful when you are pricing from a cost sheet, since it is the multiplier you apply directly. Margin is more useful when you are checking overall business health, since it directly answers what percentage of revenue is actually profit. Check both before locking in a price, the same way performance-driven strategy checks a number from more than one angle before acting on it.
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