Margin vs. markup: the difference and how to convert
Markup is the profit as a share of the cost, margin is the same profit as a share of the selling price (net). A 50% markup is only a 33.3% margin – the margin is always the smaller number.
Enter price and costs and see contribution, margin and the price for your target margin – including VAT, fees and returns.
Open the profit calculatorFormulas
Both describe the same euro amount of profit – they only use a different base. Prices here are net (without VAT).
| Markup | (net price − cost) ÷ cost |
|---|---|
| Margin | (net price − cost) ÷ net price |
| Markup → margin | markup ÷ (1 + markup) |
| Margin → markup | margin ÷ (1 − margin) |
| Price for a target margin | cost ÷ (1 − margin) |
Conversion table
The higher the markup, the further apart the two numbers are. A margin can never reach 100 %, a markup can be any size.
| Markup | Margin |
|---|---|
| 20% | 16.7% |
| 25% | 20.0% |
| 50% | 33.3% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
From purchase price to shelf price
Margins and markups are calculated on net prices; customers see gross prices. To get the shelf price for a target margin, first calculate the net price, then add VAT: cost ÷ (1 − margin) × (1 + VAT rate). With a cost of €10.00, a 40% target margin and 19% VAT the shelf price is €19.83.
This still only covers the product. Marketplace and payment fees are usually charged on the gross price, and shipping, advertising and returns come on top – which is why a margin on product cost alone is an upper limit, not what you will earn.
- Decide the target margin on the net price (e.g. 40 %).
- Net price = cost ÷ (1 − target margin).
- Shelf price = net price × (1 + VAT rate); round to your price points.
- Check the contribution per order with fees, shipping, ads and returns before you publish the price.
Which one should you plan with?
Suppliers and wholesale price lists often speak in markups; your accounts, marketplaces and most benchmarks speak in margins. Use the margin for pricing decisions: it tells you which share of every euro of revenue is left.
Both ignore VAT, fees, shipping, advertising and returns if you only use product cost. For a realistic picture use the contribution margin per order – that is what the profit calculator shows.
Worked examples: Product bought for €10.00
You add a 50% markup and want to know the margin – and which price you need for a 40% margin.
- Cost
- €10.00
- Net price with 50% markup
- €15.00
- Profit per unit
- €5.00
- Margin
- 33.3%
- Net price for 40% margin
- €16.67
- Markup needed for 40% margin
- 66.7%
To earn a 40% margin you need a 66.7% markup – before VAT, fees and advertising.