Profit and Pricing
Profit Margin vs Markup: What Is the Difference?
Margin and markup both compare price, cost, and profit, but they use different denominators. Mixing them up can make prices look healthier than they are.
By QuickWebUtility Editorial ยท Published Aug 6, 2026
The quick answer
Profit margin measures profit as a percentage of selling price. Markup measures profit as a percentage of cost. A product that costs 60 and sells for 100 has 40% margin, but 66.67% markup. Both numbers are correct; they answer different questions.
Definitions and formulas
Profit margin
Profit margin shows how much of each revenue dollar remains after cost. Use the Profit Margin Calculator when you want to check profitability from revenue and cost.
profit_margin = (selling_price - cost) / selling_price * 100Markup
Markup shows how much you add on top of cost to set a selling price. Use the Markup Calculator when you know cost and want to price from a target markup.
markup = (selling_price - cost) / cost * 100Example
If a service costs 600 to deliver and you charge 1,000, profit is 400. Margin is 400 divided by 1,000, or 40%. Markup is 400 divided by 600, or 66.67%.
Common mistakes
The biggest mistake is treating a 40% markup as a 40% margin. A 40% markup on a 100 cost creates a 140 price and only a 28.57% margin. Another mistake is comparing gross margin from one product with net margin from another.
Actionable recommendations
Choose one primary pricing metric, label it clearly, and check major prices with both margin and markup before publishing. If a price must cover fixed overhead, validate sales volume with the Break-Even Calculator and compare this guide with How to Price for Profit.
FAQ
Is a high markup always profitable?
No. Markup only compares profit with direct cost. Overhead, discounts, returns, and taxes can still reduce net profit.
Can margin and markup ever be the same?
Only when profit is zero. Once there is profit, markup is higher than margin because it divides by cost instead of selling price.