Retail Margin & Markup Calculator

Margin vs markup, the difference that costs retailers thousands

Margin and markup describe the same gap between cost and selling price, but they use different denominators. Confusing them is one of the most common pricing mistakes in small-business retail.

The two formulas

• Margin is profit as a percentage of selling price. If you sell a product for £100 that cost you £40, your margin is £60 / £100 = 60%.
• Markup is profit as a percentage of cost. Same product: £60 / £40 = 150%.

Why it matters

Imagine a supplier tells you they need a 40% markup. You apply 40% margin instead. On a £100 product, that is the difference between a selling price of £140 (markup) and £167 (margin). The same numbers can produce very different bottom lines, and getting it backwards quietly erodes profit on every sale.

Worked example

You buy a coat for £80 and want a 50% margin. Many people mentally multiply by 1.5 to get £120. That is a 50% markup, not a 50% margin. The correct price is £80 / (1 - 0.5) = £160. That doubles your gross profit per unit.

When to use which

Margin is the better lens for retail and finance: it tells you what proportion of every pound of revenue is profit. Markup is the better lens at the buying desk: it tells you the uplift to apply to cost when setting prices. The right answer is to use both, and to be explicit about which one you mean.