# Markup vs margin: why a 50% markup is only a 33% margin

> Markup is profit as a share of cost. Margin is profit as a share of the selling price. A product that costs ₹600 and sells for ₹1,000 has a 66.7% markup and a 40% margin. Mixing the two up quietly cuts your profit, and this guide shows exactly how.

Published 2026-10-08 by Toolcloak. 3 minute read. Original: https://toolcloak.pages.dev/articles/markup-vs-margin-why-a-50-percent-markup-is-only-a-33-percent-margin
Related free tool: [Markup & Margin Calculator](https://toolcloak.pages.dev/tools/markup-margin-calculator)

Two shopkeepers both say they “make 30% on everything”. One earns ₹23 on every ₹100 sale, the other earns ₹30. They are not lying. One of them is talking about markup, the other about margin, and the two words sit on different bases.

> **In short**
> - **Markup = profit ÷ cost × 100.** **Margin = profit ÷ selling price × 100.**
> - Margin is always the smaller number. A **50% markup is a 33.3% margin**, and a **100% markup is only a 50% margin**.
> - To get a margin of M%, price at **cost ÷ (1 − M)**. Adding M% to the cost gives a lower margin than you wanted.
> - A discount hits margin much harder than it looks: **10% off on a 25% margin product cuts profit by 40%**.

## Same profit, two different percentages

Take a product that costs you ₹600 and that you sell for ₹1,000. Your profit is ₹400. Now ask what percentage that profit is, and you have to choose what to divide by.

**From selling price to profit (₹ per piece)**

| Step | Amount |
| --- | --- |
| Selling price | ₹1,000 |
| Cost of the item | −₹600 |
| Profit | ₹400 |

*The profit of ₹400 is 66.7% of the cost (₹600) but only 40% of the selling price (₹1,000).*

**The same ₹400 profit**

| Markup | Margin |
| --- | --- |
| 66.7% | 40% |
| ₹400 ÷ ₹600 cost | ₹400 ÷ ₹1,000 price |
| Answers: how much did I add on top of what I paid? | Answers: how much of each sale rupee do I keep? |
| Common in trading and wholesale | Common in accounts, reports and investor decks |

## The two formulas

> **Markup % = (price − cost) ÷ cost × 100      Margin % = (price − cost) ÷ price × 100:** The top line of both is the same profit. Only the bottom line changes. Because the price is always bigger than the cost, dividing by the price always gives the smaller percentage.

You can convert one to the other without knowing any rupee amounts. Margin = markup ÷ (100 + markup). Markup = margin ÷ (100 − margin). The second formula explodes as margin rises: a 90% margin means a 900% markup.

**Margin you actually get for each markup**

|  | Markup | Margin |
| --- | --- | --- |
| Markup 10% | 10% | 9.1% |
| Markup 25% | 25% | 20% |
| Markup 50% | 50% | 33.3% |
| Markup 100% | 100% | 50% |
| Markup 200% | 200% | 66.7% |

*Each pair is the same sale. Margin climbs slowly while markup shoots up. At 100% markup you double your cost and keep exactly half of each sale.*

Try it: [Markup & Margin Calculator](https://toolcloak.pages.dev/tools/markup-margin-calculator). Enter a cost and a markup or margin to get the selling price and the other percentage.

## The pricing mistake that costs real money

Suppose you want a 30% margin on an item that costs ₹700. There are two ways to price it, and only one is right.

**Where each ₹100 of price goes**

|  | Cost | Profit |
| --- | --- | --- |
| Add 30% to cost (price ₹910) | ₹76.9 cost | ₹23.1 |
| Price for a 30% margin (₹1,000) | ₹70 cost | ₹30 profit |

*₹700 × 1.30 = ₹910 gives a profit of ₹210, which is 23.1% of ₹910. To get 30%, divide the cost by 0.70: ₹700 ÷ 0.70 = ₹1,000.*

On a business that sells ₹10 lakh a month, that gap is ₹69,000 of profit every month, just because the wrong word was used in the pricing sheet.

**Selling price needed for each margin on a ₹700 cost**

| Margin | Price | Profit | Markup needed |
| --- | --- | --- | --- |
| 20% | ₹875 | ₹175 | 25% |
| 25% | ₹933 | ₹233 | 33.3% |
| 30% | ₹1,000 | ₹300 | 42.9% |
| 40% | ₹1,167 | ₹467 | 66.7% |
| 50% | ₹1,400 | ₹700 | 100% |

## Why a discount bites harder than you think

A product costs ₹75 and sells at ₹100, a 25% margin and ₹25 profit. Offer 10% off. The price becomes ₹90, the cost is still ₹75, so profit falls from ₹25 to ₹15. The margin falls to 16.7%, and the profit drops by 40%.

**Profit per ₹100 item as the discount grows**

|  | Value |
| --- | --- |
| No discount | ₹25 |
| 5% off | ₹20 |
| 10% off | ₹15 |
| 15% off | ₹10 |
| 20% off | ₹5 |
| 25% off | ₹0 |

*At a 25% margin, a 25% discount means selling at cost. To make up for 10% off you need to sell about two thirds more units (25 ÷ 15 = 1.67).*

Stacked offers are worse still. See why in [50% off plus 20% off is not 70% off](https://toolcloak.pages.dev/articles/50-percent-off-plus-20-percent-off-is-not-70-percent-off).

## Gross margin, net margin and where GST fits

- **Gross margin** counts only the direct cost of the goods. It ignores rent, salaries and electricity.
- **Net margin** subtracts every cost, including tax. It is the share of each sale you really keep.
- **GST is not your revenue.** If you charge GST, take it out before you work out margin. [Adding or removing GST](https://toolcloak.pages.dev/articles/how-to-add-or-remove-gst-without-getting-it-wrong) is a separate step, done on the price first.
- **Losses show up in both.** A ₹100 item sold for ₹80 has a margin of −25% (loss ÷ price) and a markup of −20% (loss ÷ cost). Same ₹20 loss, two different percentages.

> **Check the word before you compare:** When a supplier says “we work on 40%”, ask which one. A 40% markup is a 28.6% margin. A 40% margin is a 66.7% markup. Same sentence, very different business.

## A quick routine for pricing any product

1. Write down the full cost per piece, including packing and delivery.
2. Decide the **margin** you want on the selling price, not a markup.
3. Divide the cost by (1 − margin) to get the price.
4. Add GST on top if you are registered, and check the result against what rivals charge.
5. Test a discount before you offer it, using the profit-per-piece figure and not the percentage.

Keep markup for talking with traders who use it. Keep margin for judging whether the business is healthy.

## Frequently asked questions

### What is the difference between markup and margin?

Markup is profit divided by cost. Margin is profit divided by selling price. The profit is the same, but margin is always the smaller percentage because the selling price is bigger than the cost.

### How do I convert markup to margin?

Margin = markup ÷ (100 + markup). For example a 50% markup is 50 ÷ 150 = 33.3% margin.

### How do I convert margin to markup?

Markup = margin ÷ (100 − margin). A 25% margin is 25 ÷ 75 = 33.3% markup.

### How do I set a price for a target margin?

Selling price = cost ÷ (1 − margin). For a ₹700 cost and a 30% margin, price = 700 ÷ 0.70 = ₹1,000.

### Can markup be more than 100%?

Yes. A product that costs ₹100 and sells for ₹300 has a 200% markup. Margin can never be above 100%.

### Is gross margin the same as net margin?

No. Gross margin subtracts only the direct cost of the goods. Net margin subtracts every cost, including overheads and tax.