To convert markup to margin, divide the markup by one plus the markup: margin = markup ÷ (1 + markup). To go the other way, divide the margin by one minus the margin: markup = margin ÷ (1 − margin). A 50% markup is a 33.33% margin; a 50% margin is a 100% markup. They describe the exact same dollar of profit on the same sale, just measured against two different bases. Check any conversion instantly with the profit margin calculator.
Markup and margin are the two percentages every seller uses, and mixing them up is the fastest way to mis-price a product. The numbers look close at small percentages and drift far apart as they grow, so a supplier quoting "40%" and a spreadsheet expecting "40%" can be talking about two completely different prices. This guide gives you the two conversion formulas, a full lookup table you can keep on hand, and worked examples in both directions, so you never confuse the two again.
The one difference: what the profit is measured against
Markup and margin both start from the same profit, which is simply price − cost. The only difference is the denominator you divide that profit by.
- Markup = profit ÷ cost. It answers "how much did I add on top of what I paid?"
- Margin = profit ÷ price. It answers "what share of the sale price is profit?"
Take an item that costs you $75 and sells for $120. The profit is $45 either way. Divide by the $75 cost and you get a 60% markup. Divide by the $120 price and you get a 37.5% margin. Same sale, same $45, two honest numbers. Because price is always larger than cost on a profitable sale, the margin percentage is always smaller than the markup percentage. That single fact is the root of every conversion below.
The two conversion formulas
Both formulas use decimals (write 50% as 0.50), then multiply the answer by 100 to read it as a percent.
Markup to margin
Margin = Markup ÷ (1 + Markup)
A 50% markup converts like this: 0.50 ÷ (1 + 0.50) = 0.50 ÷ 1.50 = 0.3333, or a 33.33% margin. The logic: a 50% markup means price is 150% of cost, and the profit (the extra 50%) is one-third of that 150% selling price.
Margin to markup
Markup = Margin ÷ (1 − Margin)
A 40% margin converts like this: 0.40 ÷ (1 − 0.40) = 0.40 ÷ 0.60 = 0.6667, or a 66.67% markup. The logic: a 40% margin means cost is the remaining 60% of the price, and the profit (40%) sits on top of that 60% cost.
Markup-to-margin and margin-to-markup reference table
Here are the most common percentages converted in both directions, each recomputed with the formulas above. Notice how the two columns stay close at the low end and split apart as the numbers climb.
| Markup | Equivalent margin |
|---|---|
| 5% | 4.76% |
| 10% | 9.09% |
| 15% | 13.04% |
| 20% | 16.67% |
| 25% | 20.00% |
| 30% | 23.08% |
| 40% | 28.57% |
| 50% | 33.33% |
| 75% | 42.86% |
| 100% (keystone) | 50.00% |
| 200% | 66.67% |
And the reverse, starting from a target margin:
| Margin | Required markup |
|---|---|
| 5% | 5.26% |
| 10% | 11.11% |
| 15% | 17.65% |
| 20% | 25.00% |
| 25% | 33.33% |
| 30% | 42.86% |
| 33.33% | 50.00% |
| 40% | 66.67% |
| 50% | 100.00% |
| 60% | 150.00% |
Two anchors are worth memorizing. A 100% markup (called keystone pricing in retail) is exactly a 50% margin — you double the cost. And a 50% margin is a 100% markup, the same statement read backward. If you remember only one pair, remember that one.
Worked example: converting a markup to find your real margin
Suppose a supplier sells you a product for $40 and you apply a 50% markup. Your customers see one price; your accountant cares about the margin. Convert it step by step.
- Set the selling price. A 50% markup on a $40 cost adds $20, so the price is $40 × 1.50 = $60.
- Confirm the profit. Profit = $60 − $40 = $20.
- Convert the markup to margin. Margin = 0.50 ÷ (1 + 0.50) = 33.33%.
- Sanity-check against the price. $20 profit ÷ $60 price = 0.3333 = 33.33%. It matches.
So that confident-sounding "50% markup" is really a 33.33% margin. If your business plan assumed a 50% margin, you are short by nearly 17 percentage points, and that gap is exactly the kind of error that quietly drains a year of profit.
Worked example: pricing from a target margin
Now run it the other way. You want a 40% margin on an item that costs you $40. Do not just add 40% to the cost — that is the classic mistake, because adding 40% is a markup, not a margin.
- Convert the target margin to a markup. Markup = 0.40 ÷ (1 − 0.40) = 66.67%.
- Apply the markup to cost. Price = $40 × (1 + 0.6667) = $66.67.
- Verify the margin. Profit = $66.67 − $40 = $26.67; margin = $26.67 ÷ $66.67 = 40.00%. Correct.
Had you instead just added 40% to the $40 cost, you would have priced it at $56, which is only a $16 profit and a 28.57% margin — well below your 40% goal. The shortcut to price directly from a margin is price = cost ÷ (1 − margin), which gives $40 ÷ 0.60 = $66.67 in one step.
Why the two numbers drift apart as they grow
At a 5% markup the margin is 4.76% — almost identical, a rounding error in everyday conversation. But at a 200% markup the margin is only 66.67%, a 133-point gap. The reason is mathematical: margin can never reach 100% (you would need a zero cost), while markup has no ceiling at all. As markup climbs toward infinity, margin merely creeps toward 100% and never arrives. That is why high-multiple businesses can quote eye-watering markups that still translate to a margin under 100%. For deeper background on how the two metrics are defined, the U.S. Small Business Administration's guidance on managing your business finances is a solid, non-commercial reference.
Where each metric is the right tool
Both numbers are useful; they just answer different questions.
| Use markup when... | Use margin when... |
|---|---|
| Setting a price from a known cost | Reading profitability off the income statement |
| Negotiating with a supplier on cost | Comparing your business to industry benchmarks |
| Working in a cost-plus pricing system | Investors or lenders are evaluating the business |
Retailers and wholesalers tend to think in markup because they start from a supplier cost. Finance teams and investors think in margin because that is what shows up on the profit-and-loss statement. Knowing both, and converting cleanly between them, is what keeps the front of the store and the back office speaking the same language.
Do the conversion without the arithmetic
Once you understand the two formulas, the fastest path is to let a tool do the algebra. Drop your price and cost into the profit margin calculator to read the margin, or use the markup calculator to see the markup on the same sale. To find the sales volume each price needs to cover your fixed costs, run it through the break-even calculator, and when you run a sale, the discount calculator shows how a price cut eats into the margin you just worked out.
Try it yourself
Run your own numbers in the free Profit Margin Calculator — instant, private, no sign-up.
Open the Profit Margin Calculator →Frequently asked questions
- How do you convert markup to margin?
- Convert markup to margin with the formula margin = markup / (1 + markup), using decimals. A 50% markup becomes 0.50 / 1.50 = 0.3333, or a 33.33% margin. The margin is always smaller than the markup because profit is measured against the larger selling price instead of the smaller cost.
- How do you convert margin to markup?
- Convert margin to markup with the formula markup = margin / (1 - margin), using decimals. A 40% margin becomes 0.40 / 0.60 = 0.6667, or a 66.67% markup. The markup is always larger than the margin because the same profit is divided by the smaller cost rather than the bigger price.
- What is a 50% markup as a margin?
- A 50% markup equals a 33.33% margin. Using margin = markup / (1 + markup): 0.50 / 1.50 = 0.3333. On a $40 cost, a 50% markup sets the price at $60, giving $20 profit, and $20 divided by the $60 price is 33.33%. Many sellers wrongly assume a 50% markup is a 50% margin.
- What is a 50% margin as a markup?
- A 50% margin equals a 100% markup, also called keystone pricing. Using markup = margin / (1 - margin): 0.50 / 0.50 = 1.00, or 100%. In plain terms, a 50% margin means you double the cost: an item costing $40 must sell for $80, so profit equals cost.
- Why is margin always lower than markup?
- Margin is always lower than markup because margin divides profit by the larger selling price, while markup divides the same profit by the smaller cost. For example, $45 profit on a $75 cost and $120 price is a 60% markup but only a 37.5% margin. The gap widens as the percentages rise.
- How do I price an item from a target margin?
- Price directly from a target margin with price = cost / (1 - margin). For a 40% margin on a $40 cost: $40 / 0.60 = $66.67. Do not simply add 40% to the cost, since that is a markup and produces only a 28.57% margin, well short of your 40% goal.
- Is keystone pricing a markup or a margin?
- Keystone pricing is a 100% markup, which equals a 50% margin. It means doubling your cost to set the retail price. An item that costs $40 sells for $80, so the $40 profit is 100% of cost (markup) and exactly half of the $80 price (margin).
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