What is the difference between margin and markup?

Both describe gross profit on a sale. Markup divides the profit by your cost. Margin divides it by your selling price. A $60 cost sold at $100 is a 66.7% markup and a 40% margin.

How do I calculate a price from a target margin?

Divide your cost by one minus the target margin. For a 50% margin on a $100 cost, divide $100 by 0.50 to get a $200 price.

What is a good gross margin?

It varies widely by industry, so compare yourself with businesses like yours rather than with a universal number. What matters is that the margin covers your overhead, debt payments, and a profit.

WithFunded › Academy › Sell more

Pricing for profit: margin vs. markup

Margin and markup describe the same profit from two directions. Mixing them up is one of the quietest ways a busy business ends up with too little left over.

WithFunded Academy · Lesson 9 of 16 · 3 min read · Updated November 2026

Key takeaways

Markup is profit as a share of your cost. Margin is profit as a share of your price.
The same sale always shows a higher markup than margin, so a 50% markup is not a 50% margin.
To price for a target margin, divide your cost by one minus the margin.
Small discounts need large volume gains to break even. Small price increases can absorb a real loss of volume.

Same profit, two measurements

You buy something for $60 and sell it for $100. Your gross profit is $40.

Markup compares that profit with your cost: $40 ÷ $60 = 66.7%
Margin compares it with your price: $40 ÷ $100 = 40%

Margin is the one that tells you how much of each sales dollar is left to pay rent, payroll, loan payments, and yourself.

The common trap

An owner wants a 50% margin and adds 50% to cost. A $100 item priced at $150 carries a 50% markup but only a 33.3% margin. Across a year of sales, that gap is the difference between a plan that works and one that never quite does.

Price for a target margin = cost ÷ (1 − target margin)

For a 50% margin on a $100 cost: $100 ÷ 0.50 = $200.

Markup on cost	Resulting margin
25%	20%
50%	33.3%
75%	42.9%
100%	50%

Calculator

Margin and markup calculator

Enter what an item costs you and what you charge. Then set a target margin to see the price it takes.

Your cost$ Your price$ Target margin%

Gross margin40%

Markup: 66.7%
Gross profit per sale: $40.00
Price needed for your target margin: $120.00

Estimates for learning only. Not an offer, a quote, or financial advice.

What a discount really costs

At a 40% margin, a 10% price cut removes 25% of your profit on every sale. To earn the same gross profit you would need to sell about 33.3% more units.

The reverse is also true. Raise the price 10% and you can lose up to 20% of your unit sales before you are worse off.

Before you discount, ask whether the offer will really bring in that much more volume. Before you rule out a price increase, ask whether you would really lose that many customers. WithFunded calculation at a 40% gross margin.

Raising prices without losing the room

Start with what is underpriced: rush jobs, small orders, custom work, and anything you dread doing at the current price.
Offer good, better, and best. Three options move the question from whether to buy to which one.
Raise for new customers first, then bring existing ones up with notice.
Review costs every quarter. If your suppliers raised prices and you did not, your margin already fell.

Common questions

What is the difference between margin and markup?: Both describe gross profit on a sale. Markup divides the profit by your cost. Margin divides it by your selling price. A $60 cost sold at $100 is a 66.7% markup and a 40% margin.
How do I calculate a price from a target margin?: Divide your cost by one minus the target margin. For a 50% margin on a $100 cost, divide $100 by 0.50 to get a $200 price.
What is a good gross margin?: It varies widely by industry, so compare yourself with businesses like yours rather than with a universal number. What matters is that the margin covers your overhead, debt payments, and a profit.

Next lesson · Sell moreThe three levers of revenue growthCustomers, average sale, and frequency: improve each a little and they compound.

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