Precis

Profit Margin & Markup

Two different numbers that get mixed up constantly — see both, and why they diverge.

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Profit per unit
£0
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Margin (% of selling price)0%
Markup (% of cost price)0%

Why margin and markup give different numbers

Margin expresses profit as a percentage of the selling price; markup expresses the same £ profit as a percentage of the cost price. Because the selling price is always higher than the cost (assuming you're profitable), margin is always a smaller percentage than markup for the same sale — a 50% markup on a £20 item prices it at £30, which is only a 33% margin, not 50%. Mixing the two up is a genuinely common pricing mistake: aiming for a "50% margin" by applying a 50% markup actually leaves you well short of your real target.

Frequently asked questions

What's the difference between margin and markup?

Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost price. The same £ profit gives a lower margin number than markup number — confusing the two is a common pricing mistake.

If I mark up 50%, what's my margin?

A 50% markup gives roughly a 33% margin, not 50% — because markup is calculated on cost while margin is calculated on the (higher) selling price. This gap is exactly why mixing the two terms up leads to under-pricing.

What's a good profit margin?

It varies enormously by industry — retail often runs on thin single-digit-to-20% margins, while services and software can run much higher. There's no universal target; compare against your specific industry.

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