Margin vs markup: the difference that changes your price
By the TrueSellerPrice team · Updated · How we calculate
Margin and markup both describe profit as a percentage, but of different things. Margin is profit divided by the selling price. Markup is profit divided by the cost. The same sale always has a higher markup than margin, and confusing the two leads to prices that are too low.
The formulas
- Margin = (price − cost) ÷ price
- Markup = (price − cost) ÷ cost
- Markup from margin = margin ÷ (1 − margin); margin from markup = markup ÷ (1 + markup)
Example: a product costs $10 and sells for $15. Profit is $5. The markup is $5 ÷ $10 = 50%; the margin is $5 ÷ $15 = 33.33%.
Conversion table
| Margin | Markup needed |
|---|---|
| 10% | 11.11% |
| 20% | 25% |
| 25% | 33.33% |
| 30% | 42.86% |
| 33.33% | 49.99% |
| 40% | 66.67% |
| 50% | 100% |
Why margin is the better measure for online sellers
Marketplace commissions, payment processing and advertising are all charged as a percentage of the selling price. Margin is measured against the same base, so you can reason about it directly: if fees take 18% of the price and you want 25% margin, 43% of the price is spoken for and 57% must cover your product and shipping. With markup, that reasoning does not work, because markup is measured against cost.
A common mistake
A seller wants a 30% margin and adds 30% to cost. That is a 30% markup, which is only a 23.08% margin before fees. After a 15% commission it can turn into a loss. To get a 30% margin you need a 42.86% markup before fees, and more once fees are included.
Use the converter on the reverse profit margin calculator to switch between the two, and let the calculator find the price that gives your margin after fees.
Try it with your own numbers
Start from the margin you want and get the selling price.
Open Reverse profit margin calculatorThis guide is general information for decision support, not tax, legal or accounting advice. Fee figures were checked on the date shown against third-party summaries of each platform's fee page; platforms change their fees, so confirm current rates on the official page.