Many shop owners mix up margin and markup. The result is prices that bring in less profit than planned.
The difference
- Markup is profit as a percentage of the cost.
- Margin is profit as a percentage of the selling price.
Buy at 1,000 and sell at 1,500: profit is 500. Markup is 500 ÷ 1,000 = 50%. Margin is 500 ÷ 1,500 = 33.33%.
Pricing for a target margin
To get a 25% margin, divide the cost by 0.75, not multiply by 1.25. A cost of 1,000 needs a price of 1,333.33. Multiplying by 1.25 gives 1,250, which is only a 20% margin.
Quick conversion
| Markup | Margin |
|---|---|
| 20% | 16.67% |
| 25% | 20% |
| 50% | 33.33% |
| 100% | 50% |
Want the exact figure for your case?
Calculate margin and markup