Margin vs. Markup: The Formulas Explained
Profit Margin is the percentage of your selling price you keep as profit.
Formula: Selling Price = Cost ÷ (1 − Margin%)
Example: cost $10, target 40% margin → $10 ÷ 0.60 = $16.67. You keep $6.67 — exactly 40% of the sale.
Markup is the amount added on top of your cost.
Formula: Selling Price = Cost × (1 + Markup%)
With platform fees, the formula becomes:
Price = Cost ÷ (1 − Margin% − Fee%)
This keeps your profit target intact even after the platform takes its cut.
Markup is always higher than margin for the same transaction. A 40% margin equals ~67% markup. Confusing the two is one of the most common — and costly — pricing mistakes.