Margin and markup are the same profit — measured against different things
Margin divides your profit by the selling price. Markup divides the same profit by the cost. Cost is the smaller number, so markup always looks bigger. Aiming for a "50% markup" when you meant a 50% margin is the classic pricing mistake.
The bar is one sale: cost + profit = selling price. Margin uses the whole bar as its base; markup uses only the cost slice — a smaller base, so the percentage is larger for the exact same profit.
Set a price from the margin you want
You cannot get a 30% margin by adding 30% to cost — that only gives a 23% margin. Divide by what is left after the margin instead. The "Target margin" chips on the calculator do exactly this.
- Cost $40, target margin 30% → 40 ÷ 0.70 = $57.14
- Cost $40, target margin 50% → 40 ÷ 0.50 = $80.00 (a 50% margin needs a 100% markup — you double the price)
Margin → markup, at a glance
| Margin | Markup | Margin | Markup |
|---|---|---|---|
| 10% | 11.1% | 40% | 66.7% |
| 20% | 25.0% | 50% | 100% |
| 25% | 33.3% | 60% | 150% |
| 30% | 42.9% | 75% | 300% |
| 33.3% | 50.0% | 80% | 400% |
Keystone pricing (doubling the wholesale cost) is a 100% markup — which is only a 50% margin.
What counts as a healthy margin
A "good" margin depends entirely on the industry. Compare net margin against your own sector, not across sectors — 5% net is solid for a grocer and alarming for software.
| Industry | Gross margin | Net margin |
|---|---|---|
| Grocery / supermarket | 25–30% | 2–3% |
| Restaurants | ~65% | 3–6% |
| General retail | 40–50% | 5–10% |
| E-commerce | 60–70% | 8–15% |
| Software / SaaS | 70–90% | 15–25% |
Gross margin counts only the cost of the product. Net margin also carries wages, rent, marketing, tax and interest — which is why a restaurant at 65% gross can end the year near 4% net.
Common questions
What is the difference between margin and markup?
Both use the same cash profit. Margin is that profit as a share of the selling price; markup is the same profit as a share of the cost. Because cost is the smaller figure, markup is always the higher percentage. Buy for $60, sell for $100: margin is 40%, markup is 66.7%.
Why can't I just add 30% to cost to get a 30% margin?
Adding 30% to cost is a 30% markup, not a 30% margin. $100 cost plus 30% is $130, and 30 divided by 130 is a 23% margin. For a true 30% margin you divide the cost by 0.70, which gives $142.86.
What is a good profit margin?
It varies by industry. As a rough guide, 5% net is low but normal in grocery, 10% is healthy, and 20% or more is excellent. Software runs 15 to 25% net; restaurants often just 3 to 6%. Always benchmark against competitors in your own field.
