Markup vs Margin.

In plain English

Markup and margin both describe the gap between what something costs you and what you sell it for, but they use different starting points. Markup divides your profit by the cost (the price you paid). Margin divides that same profit by the selling price (the price the customer paid). Because cost is always smaller than the selling price, the markup percentage is always larger than the margin percentage for the same item. Mixing them up is one of the most common pricing mistakes small business owners make.

01Why it matters

If you think you are pricing for a 50 percent margin but you are actually using 50 percent markup, you are keeping far less than you planned, and that gap repeats on every single sale. Over a year it can quietly erase your profit.

02The math, step by step

An item costs you $10 and you sell it for $15, so your profit is $5. Markup is $5 divided by the $10 cost, which is 50 percent. Margin is $5 divided by the $15 selling price, which is about 33 percent. Same item, same $5 profit, two very different percentages depending on what you divide by.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT