The quick answer
Profit margin compares profit with your selling price. Markup compares that same profit with your cost. If an item costs $60 and sells for $100, the $40 difference represents a 40% margin and a 66.67% markup. The amounts describe one sale from two different starting points.
This distinction matters when a supplier quotes a markup or a business sets a margin target. Entering the wrong percentage into a pricing calculation can produce a price that looks reasonable but leaves less contribution than expected. Start by deciding exactly which costs your calculation includes.
Calculate margin step by step
Use margin = (selling price − cost) ÷ selling price × 100. For the $60 item, subtract $60 from $100 to get $40. Divide $40 by the $100 selling price and multiply by 100. The result is 40%, meaning 40 cents of each sales dollar remains after the cost included here.
That does not automatically mean 40 cents is net profit. Rent, advertising, returns, and payment charges may still need to be covered. If you include those expenses in another version of the calculation, label that version clearly so the two results are not compared as though they measure the same thing.
Calculate markup and reverse the formula
Use markup = (selling price − cost) ÷ cost × 100. In this example, $40 ÷ $60 × 100 is approximately 66.67%. To price an item using a 40% markup instead, calculate $60 × 1.40 = $84. At that price, the margin is $24 ÷ $84 × 100, or approximately 28.57%.
To reach a target margin, use price = cost ÷ (1 − margin as a decimal). A 40% target margin on a $60 cost gives $60 ÷ 0.60 = $100. This simplified formula requires a target below 100% and does not account for fees that vary with the selling price.
A pricing check before you use the result
Use the same currency for cost and selling price. Currency display in EasyToolDesk changes labels, not exchange rates.
Decide whether packaging, shipping, and transaction charges belong in the cost basis.
Keep full precision while calculating and round the final selling price deliberately.
Recalculate the margin after applying a discount or changing a cost.
If your payment provider charges a percentage, read our guide to product pricing with percentage fees before setting the final price.
Frequently asked questions
Can margin and markup be negative? Yes. When the selling price is lower than the included cost, the sale produces a loss, so both percentages can be negative. A zero cost makes percentage markup undefined because its denominator is zero.
Which figure should I use? Use the measure that matches the question: margin for the share of selling revenue remaining after included costs, and markup for the amount added relative to cost. Always name the measure when sharing a percentage.
