“I add 50%, so I make 50%.” It sounds right. It is wrong. You make 33%. This one-word mix-up — margin versus markup — quietly underprices thousands of small businesses every single day, and most never notice.
The Math
They measure the same profit against two different bases:
- Markup = profit as a percentage of your cost (Profit ÷ Cost).
- Margin = profit as a percentage of your selling price (Profit ÷ Price).
Take a product that costs you $40. Add a 50% markup and you sell it for $60. Your profit is $20. But $20 out of a $60 price is only a 33% margin — not 50%. Here’s the full translation:
Markup does NOT equal margin
Why it matters: your costs — rent, wages, everything — have to come out of your margin, not your markup. If you need a 40% margin to stay afloat and you’re setting prices with a 40% markup, you’re only keeping ~29% — and slowly bleeding without knowing why.
The Nuance
Neither number is “wrong” — they just answer different questions. Markup is handy at the point of pricing (“what do I add to cost?”). Margin is the truth about profitability (“what do I keep?”). The mistake is treating them as the same number.
Stop Guessing — See Both at Once
Enter your cost and price and instantly get your gross profit, margin and markup, so you never confuse the two again. Free, private, no sign-up.
Try the Profit Margin & Markup Calculator →💬 Quick confession box
A — I knew margin and markup were different.
B — …I’ve definitely mixed them up.
Drop A or B. No judgement — option B is more common than any accountant will admit.
— Maya, who has watched a 50% “markup” quietly become a 33% reality one too many times.