Profit Margin & Markup Calculator — Price From a Target Margin
Margin is a share of the price; markup is a share of the cost. They are never the same number. Selling a $40 item for $60 is a 50% markup but only a 33.3% margin — $20.00 of profit per unit. To convert: margin = markup ÷ (1 + markup). A 50% markup is a 33.3% margin, and pricing as though they were interchangeable is the most expensive arithmetic mistake in retail.
| Selling price | $60.00 |
|---|---|
| Unit cost | −$40.00 |
| Profit marginShare of the sale price you keep. | 33.33% |
| MarkupPercentage added on top of your cost. | 50.00% |
| Break-even volumeAt $20.00 profit per unit you need 100 sales a month to cover $2,000.00 of fixed costs. | 100 units/month |
| Profit per unit | $20.00 |
A 50.0% markup produces a 33.3% margin. If you meant to keep 50.0% of the sale price, you need to charge $80.00 instead.
The two formulas
Same profit, different denominator. That is the entire difference, and it is worth writing out because almost every pricing mistake traces back to using one where the other was meant.
Because price is always larger than cost for a profitable item, margin is always the smaller number. A 50% markup is a 33.3% margin. A 100% markup is a 50% margin. A 300% markup — which sounds predatory — is a 75% margin, which is an ordinary software gross margin.
What confusing them costs, in dollars
"Margin and markup are different" is repeated everywhere and priced nowhere. Here is the actual cost of the specific mistake people make: deciding on a target margin, then adding that percentage to cost as a markup. On a $40 unit cost:
| Margin you wanted | Price if you add it as markup | Margin you actually get | Price you needed | Profit lost per unit |
|---|---|---|---|---|
| 20% | $48.00 | 16.7% | $50.00 | $2.00 |
| 30% | $52.00 | 23.1% | $57.14 | $5.14 |
| 40% | $56.00 | 28.6% | $66.67 | $10.67 |
| 50% | $60.00 | 33.3% | $80.00 | $20.00 |
| 60% | $64.00 | 37.5% | $100.00 | $36.00 |
Read the last column downward. The error is not constant — it accelerates. At a 20% target it costs $2.00 a unit, which most people would never notice. At a 60% target it costs $36.00 a unit, which is 18 times as much and more than the entire profit the wrong price produces. High-margin businesses are punished hardest by this mistake, which is exactly backwards from where people expect the risk to be.
Margin at different prices
The same $40 cost across a range of prices, so you can see how quickly margin moves:
| Price | Profit | Margin | Markup |
|---|---|---|---|
| $50.00 | $10.00 | 20.0% | 25% |
| $60.00 | $20.00 | 33.3% | 50% |
| $80.00 | $40.00 | 50.0% | 100% |
| $100.00 | $60.00 | 60.0% | 150% |
| $120.00 | $80.00 | 66.7% | 200% |
Notice the shape: doubling the price from $50.00 to $80.00 does not double the margin, it moves it from 20.0% to 50.0%. Margin has a ceiling at 100% and approaches it asymptotically, which is why chasing the last few margin points costs disproportionately more price than the first few.
A worked example
A $40 unit sold for $60
| Line | Working | Amount |
|---|---|---|
| Selling price | what the customer pays | $60.00 |
| Unit cost | what it costs you | −$40.00 |
| Profit per unit | price − cost | $20.00 |
| Markup | $20.00 ÷ $40.00 | 50.0% |
| Margin | $20.00 ÷ $60.00 | 33.3% |
| Break-even | $2,000 ÷ $20.00 | 100 units/month |
If you had wanted a 50% margin rather than a 50% markup, the price would have had to be $80.00 — nearly $20.00 higher per unit. That single substitution is the difference between a business that clears its fixed costs and one that does not.
Who this is for
Anyone setting prices, and anyone reconciling a supplier's markup language with their own margin targets. It is most useful run in "target margin" mode: enter what you need to keep and let it produce the price, rather than picking a price and discovering the margin afterwards. If you sell on a marketplace, run the resulting price through the relevant fee calculator too — platform fees come out of the margin this page computes, not out of thin air.
What this does not account for
- Platform and payment fees, which reduce the price side of the margin. See the Etsy, eBay, and Amazon FBA calculators.
- Returns and shrinkage, which raise effective unit cost across a catalogue.
- Discounting. A 20% promotional discount on a 33% margin removes roughly 60% of the profit, not 20%.
- Blended margin. This is per-unit; a catalogue's overall margin is weighted by what actually sells, which is rarely what you expect.
- Your time, which is the largest uncosted input for anyone making the product themselves.
Sources and dates
There are no rate sources on this page — margin and markup are definitions rather than published figures, and every number above is arithmetic on the cost and price you enter. The conversion identities are standard: margin = markup ÷ (1 + markup), and its inverse. If a figure here disagrees with your accounting system, the likely cause is that the two are using different denominators, which is the whole subject of this page — let us know either way.
Questions people actually ask about this
What is the difference between margin and markup?
The denominator. Markup is profit as a share of what the item cost you; margin is profit as a share of what you sold it for. Same profit, different base, so margin is always the smaller number.
On this example: $20.00 of profit on a $40 cost is a 50% markup, and that same $20.00 on a $60 price is a 33.3% margin.
I want a 50% margin — what markup do I add?
100%. To convert a target margin into the markup that achieves it, use markup = margin ÷ (1 − margin). A 50% margin needs a 100% markup; a 40% margin needs 66.7%; a 33.3% margin needs 50%.
Adding 50% because you wanted a 50% margin gives you a 33.3% margin instead, and costs $20.00 of profit on every unit at a $40 cost. The correct price is $80.00, not $60.00.
How much does confusing them actually cost?
More the higher your target, because the error compounds. On a $40 unit cost:
- Want 20% margin → adding 20% markup prices at $48.00 and delivers 16.7%. Correct price $50.00. Lost: $2.00/unit
- Want 30% margin → adding 30% markup prices at $52.00 and delivers 23.1%. Correct price $57.14. Lost: $5.14/unit
- Want 40% margin → adding 40% markup prices at $56.00 and delivers 28.6%. Correct price $66.67. Lost: $10.67/unit
- Want 50% margin → adding 50% markup prices at $60.00 and delivers 33.3%. Correct price $80.00. Lost: $20.00/unit
- Want 60% margin → adding 60% markup prices at $64.00 and delivers 37.5%. Correct price $100.00. Lost: $36.00/unit
At 1,000 units a month, the 50% row is $20,000 a month of profit that was available and not taken.
Can I have a margin over 100%?
No. Margin is a share of the sale price, so 100% would mean the item cost you nothing and anything above it is arithmetically impossible — the calculator rejects it rather than returning a nonsense figure. Markup has no ceiling: a $1 item sold for $101 is a 10,000% markup and a 99% margin.
This asymmetry is why markup is the friendlier number for conversation and margin is the honest one for planning. A supplier quoting "300% markup" sounds outrageous and means a 75% margin.
How many units do I need to sell to break even?
Fixed costs divided by profit per unit. At $20.00 of profit and $2,000 of monthly fixed costs, that is 100 units a month before you have made anything at all.
The useful thing about this number is how violently it moves with price. Raising the price 10% here — to $66.00 — takes profit per unit to $26.00 and drops break-even to 77 units. A 10% price rise cut the volume you need by 23%.
Should I price on margin or markup?
Price on markup, plan on margin. Markup is easier to apply consistently across a catalogue where costs vary, which is why distributors and wholesalers work in it. Margin is what your P&L is denominated in and what tells you whether the business works, which is why finance works in it.
The failure happens at the boundary — someone in planning says "we need 40 points" and someone in pricing adds 40%. Agreeing which word means which is worth more than any single pricing decision.
Where these numbers come from
This tool has no external rate data. Margin and markup are definitions rather than published figures, so every number on this page is arithmetic on the cost and price you enter. The identities used are stated in full:
profit = price − costmarkup = profit ÷ costmargin = profit ÷ pricemargin = markup ÷ (1 + markup)markup = margin ÷ (1 − margin)break-even units = fixed costs ÷ profit per unit