Reviewed November 2026. Formulas are shown above the guide. Report an error or request a calculator.
Margin and markup are different numbers
Markup is profit as a share of cost. Margin is profit as a share of the selling price. On the same sale the markup is always the larger number: a part that costs $10 and sells for $15 has a 50% markup but only a 33% margin. Business plans and accountants usually speak in margin, while sales teams often quote markup, and the gap between them quietly eats profit.
Worked example
A part with a full unit cost of $18.40 and a 35% target margin needs a price of $18.40 ÷ (1 − 0.35) = $28.31. That is a markup of 53.8% on cost.
| Markup on cost | Margin on price |
|---|---|
| 25% | 20.0% |
| 35% | 25.9% |
| 50% | 33.3% |
| 100% | 50.0% |
Selling through a marketplace or distributor that takes 15% of the price changes the formula to cost ÷ (1 − margin − fee). With the same cost and margin the price becomes $36.80.
Which cost to start from
Start from the full cost of the unit: landed cost for bought-in goods, or material plus conversion cost adjusted for yield for parts you make. The other calculators on this site give you those figures. Starting from the supplier price or the material cost alone sets a price that looks profitable and is not.
Frequently asked questions
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup is a 33.3% margin.
How do I convert margin to markup?
Markup = margin ÷ (1 − margin). A 40% margin needs a 66.7% markup.
How do marketplace fees change the price?
Fees charged as a percentage of the price must come out of the price too, so divide cost by (1 − margin − fee percentage).
What margin should a manufacturer target?
It varies widely by industry. Gross margins of 25–40% are common for discrete manufacturers; compare with your own overhead and the margin your market accepts.