Margin vs markup at a glance
Each margin has exactly one equivalent markup. Use this table to translate between the two conventions.
| Margin | Markup | Example (cost $100) |
|---|---|---|
| 10% | 11.1% | sell at $111.11 |
| 20% | 25% | sell at $125.00 |
| 30% | 42.9% | sell at $142.86 |
| 40% | 66.7% | sell at $166.67 |
| 50% | 100% | sell at $200.00 |
| 60% | 150% | sell at $250.00 |
- Gross margin excludes overheads; operating and net margins subtract progressively more costs.
- A negative margin means the item sells below direct cost.
- Typical margins vary enormously by industry — comparing against peers requires the same cost definition.
What is profit margin?
Gross profit margin expresses how much of each unit of revenue remains after direct costs. It is calculated as profit divided by revenue, multiplied by 100. Because the denominator is revenue, margin can never legitimately exceed 100% for a sale with a positive price, and a product sold at twice its cost has a 50% margin, not 100%.
Markup answers a different question: how much was added on top of cost. Markup divides the same profit by cost instead of revenue. The two figures diverge as profitability grows — a 50% margin equals a 100% markup. Confusing them is one of the most common and costly pricing errors in retail and e-commerce.
Gross margin ignores overheads such as rent, salaries and marketing. Businesses also track operating margin and net margin, which subtract progressively more costs; comparing your gross margin against industry-typical figures requires using the same definition.
How to use this margin calculator
- Enter the cost of the product or service (direct cost of goods).
- Enter the revenue — the selling price actually charged.
- Read the gross margin percentage, the absolute profit, and the equivalent markup on cost.
The formulas behind margin and markup
Worked example: cost $60, revenue $100. Profit = $40. Margin = 40 ÷ 100 × 100 = 40%. Markup = 40 ÷ 60 × 100 = 66.7%. To price FOR a target margin, divide cost by (1 − margin): a 40% target margin on a $60 cost gives $60 ÷ 0.60 = $100.
Common mistakes
- Applying a 'margin' as if it were markup: adding 40% to cost yields only a 28.6% margin, not 40%.
- Pricing for a 100% margin — impossible; margin approaches 100% only as cost approaches zero.
- Forgetting VAT/sales tax: margin should be computed on net-of-tax revenue where tax applies.
- Ignoring payment-processor and platform fees, which reduce realized revenue.
よくある質問
What is the difference between margin and markup?
Margin divides profit by revenue; markup divides the same profit by cost. Selling at $100 with a $60 cost is a 40% margin and a 66.7% markup. Margin is always the smaller number for a profitable sale.
How do I price a product for a 40% margin?
Divide cost by (1 − 0.40). A $60 cost priced for a 40% margin is $60 ÷ 0.6 = $100. Adding 40% on top of cost instead ($84) would deliver only a 28.6% margin.
Can a margin be more than 100%?
No. Because margin is profit divided by revenue, it approaches 100% only as cost approaches zero. If someone quotes a margin above 100%, they are almost certainly describing markup.
Is this gross or net margin?
Gross: it uses only the direct cost you enter. Net margin additionally subtracts overheads, marketing, payment fees and taxes, so it is always lower than gross margin.
Should I calculate margin before or after sales tax?
On net revenue, excluding VAT/GST/sales tax collected for the government. Tax collected is not income; including it overstates both revenue and margin.
参考文献
- U.S. Small Business Administration — pricing and cost-of-goods guidance for small businesses.
- Brealey, Myers & Allen, Principles of Corporate Finance — profitability ratio definitions.
- CFI (Corporate Finance Institute) — Gross Margin vs Markup reference article.