How it works
Margin and markup describe the same profit two ways. Margin is profit as a share of the selling price; markup is profit as a share of cost.
Confusing the two is one of the most common pricing mistakes. If you want a 30% margin but add 30% to cost, you only get a 23.1% margin. To hit a 30% margin you need a 42.9% markup.
Formula
Markup = Margin ÷ (1 − Margin). Margin = Markup ÷ (1 + Markup).
Questions people ask
What markup gives a 50% margin?
A 100% markup. Doubling the cost makes profit equal to cost, which is half the price.
Can margin be over 100%?
No. Margin is profit divided by price, and profit can never exceed the price. Markup has no upper limit.
Which should I use for pricing?
Use whichever your industry and accounting reports use, but be consistent. Financial statements report margin, so many businesses set a target margin and convert it to a markup when pricing.