cash-flow
Markup vs Margin Calculator — They're Not the Same
Markup and margin are different math. Markup is profit as a percentage of cost. Margin is profit as a percentage of price. A 50% markup is only a 33% margin. SMB owners who think 'I want a 30% margin so I'll mark up 30%' systematically under-price. This tool surfaces both numbers so you can price with the right one.
Educational estimate based on the inputs you entered — not financial, legal, or tax advice. Verify against your specific situation before acting on this output.
How it works
Methodology
Inputs
- Cost
- What it costs you to acquire or produce one unit.
- Price
- What you charge the customer for one unit.
Formula
Profit per unit = Price − Cost Markup % = Profit ÷ Cost (uses cost as denominator) Margin % = Profit ÷ Price (uses price as denominator) Conversions: Required markup for a target margin = Margin ÷ (1 − Margin) Required margin for a target markup = Markup ÷ (1 + Markup)
Assumptions
- Cost is fully loaded direct cost (materials + labor + landed cost), not just invoice price.
- Calculation is per-unit — blended margin across a product mix requires weighting by unit volume.
Worked examples
Common pricing confusion
- Cost
- $50
- Price
- $75
50% markup but only 33% margin. Owners who set a '50% markup goal' thinking they're hitting 50% margin systematically under-price.
Frequently asked
Questions readers ask
What's the difference between markup and margin? +
Markup is the percentage added to cost to get to price. Margin is the percentage of price that's profit. Markup = profit ÷ cost. Margin = profit ÷ price. They're different denominators, so they're different numbers for the same situation.
What markup gives me a 30% margin? +
About 43% markup. The formula: required markup = margin ÷ (1 − margin). For 30% margin, that's 0.30 ÷ 0.70 ≈ 0.43 → 43% markup. This calculator computes both for any cost + price, so you can see the relationship.
Which number should lenders and investors care about — markup or margin? +
Margin. Gross margin (profit ÷ price, i.e. ÷ revenue) is the standard figure that shows up on financial statements and in underwriting, because it's expressed against the top-line number lenders already have — revenue. Markup is mainly an internal pricing tool for setting the price from a known cost. If you're preparing numbers for a lender or investor conversation, lead with margin.
Can markup or margin be negative? +
Yes — if price is set below cost, both markup and margin go negative, meaning you're selling at a loss on that unit. This shows up most often on loss-leader pricing, closeout inventory, or a pricing mistake. The calculator will surface a negative number rather than block the input, since 'below cost' is sometimes an intentional strategy, not always an error.
How does blended margin work across a product mix? +
This calculator is per-unit. Blended (overall) margin across multiple products requires weighting each product's margin by its share of total unit volume or revenue: Blended margin = Σ(each product's margin × its share of total revenue). A business selling a high-margin service alongside a low-margin add-on product needs to run this weighting separately — the per-unit number for either product alone won't tell you the company-wide margin.
This tool is for educational purposes only and is not financial, legal, or tax advice. Final terms and eligibility depend on lender underwriting; consult a tax professional before acting on tax-tool output. ClearValue Lending is a funding platform.
https://clearvaluelending.com/tools/markup-vs-margin-calculator