See your gross margin and your markup at the same time — the two numbers people constantly confuse, because they share a profit but not a denominator.
Margin and markup here are unit-level figures. They exclude shipping, payment processing fees, marketplace commissions, advertising, returns and overhead — so your net margin will be lower than the gross margin shown. Use the profit calculators on this site to fold those costs in.
Both measure the same profit — they just divide it by something different. Margin divides by the selling price; markup divides by the cost. Buy at $50 and sell at $100 and you have made $50 either way, but that is a 50% margin and a 100% markup. Say “50%” without saying which one and you have said nothing useful — this is the single most common pricing error in retail, and it goes in both directions.
Both bars are drawn to the same scale. The profit slice is identical in dollars — only the bar it is measured against changes.
An item that costs you $50 and sells for $100 — the pair most often quoted as simply '50%'.
Gross margin and markup side by side, because they are not the same number. Work back from a target margin or markup to the right price, and see what a discount really costs your margin.
They measure the same profit and divide it by different things, which is why quoting one without naming it tells your listener nothing. Margin divides profit by the selling price; markup divides it by the cost. Buy at $50 and sell at $100 and you have made $50 — that is a 50% margin and a 100% markup, from the same transaction. Most pricing mistakes trace back to this single ambiguity, and the error runs in both directions: someone who "adds 50%" to a $50 cost lands on $75, which is only a 33% margin, while someone targeting a 50% margin needs to charge $100.
The relationship is not linear, and that is what catches people out. A 20% margin is a 25% markup — a five-point gap. A 50% margin is a 100% markup — a fifty-point gap. An 80% margin is a 400% markup. As margin approaches 100%, markup runs to infinity, because a 100% margin would require a zero cost. The conversion table on this page shows the whole curve, and it is worth internalising the shape rather than memorising individual pairs: the two numbers start close together at low margins and diverge dramatically as margins improve.
The most common real-world use is reverse pricing: you know what you paid and what margin you need, and you want the price. The formula is price = cost ÷ (1 − margin), not cost × (1 + margin). That second formula is the markup formula, and using it when you meant margin is the classic error. To hit a 40% margin on a $50 cost you must charge $83.33. Multiplying $50 by 1.40 gives $70, which is only a 28.6% margin — a twelve-point shortfall that quietly eats a quarter of your intended profit.
A discount comes off the price, and the price is the margin's denominator — so margin falls faster than the discount suggests. Take the $50-cost, $100-price item at a 50% margin and discount it by 20%: the price drops to $80, profit drops to $30, and the margin falls to 37.5%. That is a 12.5-point fall from a 20% discount. Push the discount to 50% and the margin hits zero — you are selling at cost. This is why retailers who "run a 20% off sale" are often shocked by what it does to their margin: the discount is measured against the price, but the damage is measured against the profit, and the profit is the smaller number.
Everything here is unit-level gross margin, and it is only the first layer. Shipping, payment processing, marketplace commissions, advertising, returns and overhead all come out of the profit slice, not the cost slice. A product with a comfortable-looking 50% gross margin can be unprofitable once a marketplace takes 15% and you spend 20% on ads. Use this calculator to get the unit economics right, then use the pricing and profit calculators on this site to fold in the costs that sit between gross margin and money in the bank.
They use the same profit with different denominators. Margin is profit divided by selling price; markup is profit divided by cost. An item costing $50 and selling for $100 has a 50% margin and a 100% markup. Margin can never reach 100% unless your cost is zero, while markup has no upper limit.
Markup = margin ÷ (1 − margin), with both expressed as decimals. A 40% margin is 0.4 ÷ 0.6 = 66.7% markup. Going the other way, margin = markup ÷ (1 + markup): a 100% markup is 1 ÷ 2 = 50% margin. The conversion table on this page covers the usual price points so you do not have to work it out each time.
Divide the cost by one minus the margin: price = cost ÷ (1 − margin). For a 40% margin on a $50 item that is $50 ÷ 0.6 = $83.33. Do not use cost × (1 + margin) — that is the markup formula and it will leave you short of your target.
No — it cuts it by more. A discount reduces the price and the profit at the same time, and margin is profit over price. A 50%-margin item discounted 20% falls to a 37.5% margin, a loss of 12.5 percentage points. The higher your starting margin, the more points a given discount costs you.
No. Gross margin is what is left after the unit cost only. Operating expenses — shipping, fees, ads, salaries, rent — have not been subtracted. Gross margin tells you whether the product is priced sensibly before overhead; net profit tells you whether the business is making money. A 50% gross margin can still produce a net loss.
Why did the math book look so sad?
No signups, no data sold. Every tool is free to use — the free tier allows 5 downloads or saves per day, and the optional Pro plan ($7/mo, $59/yr) adds unlimited downloads, batch processing, white-label exports and an ad-free experience.
☕Support me on Ko-fi— support the free tier100% of proceeds go towards hosting & building more free tools.