Margin and markup both describe profit, but they use different bases. Confusing them can produce a lower selling price—and less profit—than a business intended.
The shortest definition
Profit margin
Profit ÷ selling price × 100
Markup
Profit ÷ cost price × 100
A worked example
Suppose an item costs ₹1,000 and sells for ₹1,250. Profit is ₹250. Margin is ₹250 divided by ₹1,250, which equals 20%. Markup is ₹250 divided by ₹1,000, which equals 25%.
| Measure | Calculation | Result |
|---|---|---|
| Profit | ₹1,250 − ₹1,000 | ₹250 |
| Margin | ₹250 ÷ ₹1,250 | 20% |
| Markup | ₹250 ÷ ₹1,000 | 25% |
Finding a price from a target margin
Use selling price = cost ÷ (1 − target margin). Write the target percentage as a decimal. For a ₹1,000 cost and a 20% target margin, divide ₹1,000 by 0.80. The required selling price is ₹1,250.
Which number should you use?
Margin is helpful for understanding how much of sales revenue remains after the measured cost. Markup is useful when building a selling price from cost. Teams can use either, but quotes, spreadsheets, and reports should label the measure explicitly.
Common mistakes
- Using markup when a target margin was requested.
- Leaving delivery, payment fees, or variable service costs out of cost price.
- Calculating GST as profit instead of treating collected tax separately.
- Rounding the percentage too early instead of rounding the final price.