Profit margin or markup — get both from cost and price.

What's the difference between margin and markup?

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.

How do I price a product for a target margin?

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.

What's a typical retail margin?

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 vs. markup — which should I use to set prices?

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.