Understanding Markup vs Margin

Understanding Markup vs Margin: What's the Difference?

If you've ever been involved in pricing products or services, you've likely come across the terms markup and margin. 

While they're often confused, they are not the same thing – and understanding the difference is essential for making informed business decisions.

Markup is the percentage you add to the cost of a product to determine its selling price.

• Formula: (Selling Price – Cost) ÷ Cost × 100%

Margin (or gross profit margin) is the percentage of the selling price that is profit.

• Formula: (Selling Price – Cost) ÷ Selling Price × 100%

If you buy a product for £50.00 and sell it for £75.00 you have made £25.00.

Therefore

(£75.00-£50.00) / £50.00 x 100 = 50% markup

Or

(£75.00-£50.00) / £75.00 x 100 = 33.3% margin