Is my price giving me the margin I think?
Margin and markup use the same profit but different percentages. Mixing them up is how prices end up too low.
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Margin check
Cost$2.00
Selling price$4.50
Profit per item$2.50
Margin55.6%
Markup125%
A markup of 125% is a margin of only 55.6%.
How it’s calculated
Profit = price − cost. Margin = profit ÷ price. Markup = profit ÷ cost. For a target margin, price = cost ÷ (1 − margin).
Example: cost $2.00, price $4.50 → margin 55.6%, markup 125%.
Part 1Common questions
Common questions
What is the difference between margin and markup?
Both start from the same profit. Margin divides it by the selling price, markup divides it by the cost. That is why markup is always the bigger number.
Which one should I use to set prices?
Use margin when you think about what you keep from each sale. Use markup only if your supplier or your habit is to add a percentage to cost, and check the margin it gives you.
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More free tools
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