Enter cost and price, or cost and a target margin, to see profit, margin percentage, and markup percentage side by side.
Margin and markup describe the same profit against two different bases, and confusing them is the single most expensive arithmetic error in small-business pricing.
Take the page's defaults: cost $60, selling price $100. Profit is $40.
Same transaction, same $40, two numbers that are not close. Markup is always the larger of the two, and the gap widens as profitability rises.
Here is where it costs money. Told to hit "40% margin", the instinctive move is to add 40% to cost: $60 × 1.4 = $84. That price delivers a margin of only 28.6%, not 40. To actually achieve a 40% margin you divide rather than multiply — $60 ÷ (1 − 0.40) = $100. Pricing at $84 instead of $100 gives away $16 a unit, and on a business selling thousands of units the error is not recoverable through volume.
The rule: to convert a target margin into a price, divide cost by (1 − margin). Never multiply by (1 + margin).
Both are legitimate; they answer different questions.
Trouble arrives when the two are used in the same conversation without being named — a supplier quoting "40%" meaning markup while you hear margin produces a price 16% lower than you intended. Whenever a percentage is quoted, ask which base it sits on.
The margin here is gross: selling price minus the direct cost of the item. It does not account for rent, salaries, software, marketing, shipping, payment processing or returns, all of which come out of that 40% before anything reaches you.
This is why a healthy-looking gross margin can still describe a business losing money, and why the relevant question is never "is 40% good" but "does the gross profit per unit, multiplied by realistic volume, cover the fixed costs". The break-even figures on this page answer exactly that — they show how many units the contribution has to cover before the business is standing still. See the break-even calculator to model the fixed-cost side properly.
Margin is profit expressed as a percentage of the selling price; markup is profit expressed as a percentage of the cost. It's the single most common pricing mix-up: for a product costing $60 and sold at $100, profit is $40. Margin is 40 ÷ 100 = 40%, but markup is 40 ÷ 60 ≈ 66.67%. The two numbers always differ (except when profit is zero) because they divide the same profit dollar amount by two different bases — price versus cost.
Use price = cost ÷ (1 − target margin as a decimal). For a $60 cost and a 40% target margin, price = 60 ÷ (1 − 0.40) = 60 ÷ 0.60 = $100. Note this is not the same as simply adding 40% to cost — doing that (60 × 1.40 = $84) only gets you a 40% markup, which works out to just a 28.6% margin, well short of the 40% margin target.
It varies hugely by industry — thin single-digit margins are normal in grocery and commodity goods, while some specialty retail, apparel, and luxury categories run 50% or higher. There's no single universal benchmark worth targeting; compare your numbers against your specific industry rather than assuming any general figure applies to your business.
Margin is generally more useful for pricing decisions since it directly tells you what share of each sale is profit, which ties straight into overall profitability and revenue targets. Markup is more common in retail cost-plus pricing conversations, where a supplier or retailer thinks in terms of "cost plus X%." Either works as a framework as long as everyone discussing the numbers is clear on which one is actually being used.
Worked example: a product costing $60 sold at $100 earns $40 profit — a 40% margin and a 66.67% markup. Working the other direction, a $60 cost with a 40% target margin also solves back to a $100 price, confirming the two calculation modes agree.
Margin math tells you what each item should sell for — VenStock is a desktop stock register app that tracks how much of it you actually have, with reorder alerts per item.
Running a sale instead of setting a base price? See the Discount Calculator or the Break-Even Calculator.