Markup vs margin
Markup is profit over cost; margin is profit over price. Put in a cost and a markup, a margin or a price, and see the other two, and the price that makes the margin you want.
Worked out in your browser. Nothing you type leaves this page.
Put in a cost, then a markup, a margin or a price: the other two follow it.
What it comes to
Worked out for a $1,000.00 cost marked up 25%.
A $1,000.00 cost marked up 25% is $1,250.00: a 20.0% margin.
How it was worked out
Markup is profit over cost: $250.00 ÷ $1,000.00 = 25.0%.
Margin is profit over price: $250.00 ÷ $1,250.00 = 20.0%.
- Price
- $1,250.00
- Profit
- $250.00
- Markup
- 25.0%
- Margin
- 20.0%
The margin a markup leaves
| Markup | The margin it leaves |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 33.3% | 25.0% |
| 40% | 28.6% |
| 50% | 33.3% |
| 60% | 37.5% |
| 75% | 42.9% |
| 100% | 50.0% |
The markup a margin takes
| The margin you want | The markup it takes |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 35% | 53.8% |
| 40% | 66.7% |
| 50% | 100.0% |
Why the difference costs money
A business that wants to keep 25% of what it charges, and marks its costs up 25%, keeps 20%: the markup is a share of the cost, and the margin a share of the larger price. To keep 25%, the markup has to be a third. The gap grows with the margin: a 50% margin takes a 100% markup.
Margin is the one to aim at, because it is the share of every dollar charged that is left for the overhead and the profit — the share a business plans by.
Prices at your margin, in SMG Tools
Every item in SMG Tools' Price Book shows its margin beside its price, and recommends the price that makes your target margin — the cost divided by what the margin leaves, as here. A proposal line priced under the target is marked before the proposal is sent, and every job shows the margin it really made.
Try it on your own Price Book: Pro is free for 90 days, or see every free calculator.