Margin Calculator

Understanding Your Profit: Margin vs. Markup

For any business, understanding profit is key to survival and growth. Two of the most common terms, "profit margin" and "markup," are often used interchangeably, but they represent very different things. This calculator helps you see both clearly.

What is Profit Margin?

Profit Margin (or Gross Profit Margin) is your profit relative to your revenue or selling price. It's expressed as a percentage and answers the question: "How much profit do I make for every dollar in sales?"

Formula: Margin = (Revenue - Cost) / Revenue
Example: You sell a product for $150 (Revenue) that cost you $100 (Cost). Your profit is $50. Your margin is ($50 / $150) = 33.3%.

What is Markup?

Markup is your profit relative to your cost. It's also a percentage and answers the question: "How much did I mark up my product from its cost?"

Formula: Markup = (Revenue - Cost) / Cost
Example: Using the same numbers, your profit is $50 and your cost was $100. Your markup is ($50 / $100) = 50%.

As you can see, a 50% markup results in a 33.3% margin. Margin is often the more important metric for financial health, as it tells you what percentage of your total sales you get to keep as profit.