Margin vs Markup: What Is the Difference?

Published on September 28, 2026

When setting prices for products or services, business owners frequently confuse profit margin and markup. While both terms measure profitability, they do so from completely different perspectives.

What is Profit Margin?

Profit margin expresses the profit earned on a sale as a percentage of the total selling price. It tells you how much out of every dollar in revenue is kept as gross profit.

Margin Formula:
Margin (%) = [(Selling Price - Cost) / Selling Price] × 100

What is Markup?

Markup expresses the percentage added to the cost of a product to determine its selling price.

Markup Formula:
Markup (%) = [(Selling Price - Cost) / Cost] × 100

A Quick Example

If you buy a product for $80 and sell it for $100:

• Profit: $20
• Markup: ($20 / $80) = 25%
• Margin: ($20 / $100) = 20%