If you've ever Googled "how to price my products," you've probably run into both of these words — margin and markup — and walked away more confused than when you started. You're not alone. Even experienced sellers mix them up. Let's fix that right now.
What Is Margin?
Margin (also called profit margin or gross margin) is the percentage of your selling price that you actually keep as profit.
Example: You sell a candle for $20. It cost you $12 to make. Your profit is $8. Your margin is $8 ÷ $20 = 40%.
Notice that margin is always calculated as a percentage of the selling price. That's the key. You're asking: "Out of every dollar a customer pays me, how many cents do I keep?"
What Is Markup?
Markup is the percentage you add on top of your cost to arrive at a selling price.
Example: Same candle. It cost $12 to make. You want to make $8 profit, so you sell for $20. Your markup is $8 ÷ $12 = 67%.
Notice something: the profit is exactly the same ($8), but the percentages are very different — 40% margin vs. 67% markup. This trips people up constantly.
Why Does the Difference Matter?
Here's the danger: if you confuse the two and accidentally price using the wrong formula, you'll consistently underprice your products without realizing it.
- A seller who wants a "50% profit" but uses markup math will actually only keep 33% of each sale.
- Platform fees like Etsy (6.5%) and eBay (13.25%) are deducted from your selling price — making margin the more accurate way to measure real profit.
- Investors and business mentors always talk in margins. Learning this language now will serve you as your business grows.
Which One Should You Use?
For pricing decisions: use margin. It gives you a clearer picture of how much you actually keep after costs and fees. It's also the number that professional accountants, business coaches, and financial tools use.
Markup is still useful — it's a quick way to set a starting price from your cost — but always double-check what your resulting margin will be before you finalize anything.
The Bottom Line
- Margin = profit as a % of your selling price (what you keep)
- Markup = profit as a % of your cost (what you add on top)
- Margin is always a lower percentage than markup for the same transaction
- Use margin as your primary pricing target — it accounts for fees more accurately
- Our calculator works in margin, so you always know exactly what you're keeping
Once this clicks, you'll never look at your pricing the same way again. And that's a very good thing.