Markup and margin use the same two numbers — cost and selling price — but divide differently, producing different percentages that are easy to mix up when pricing.
The two formulas side by side
- Markup % = (Selling price − Cost) ÷ Cost
- Margin % = (Selling price − Cost) ÷ Selling price
Why the gap between them grows at higher percentages
At low percentages, markup and margin are close — a 10% markup is roughly a 9% margin. At higher percentages the gap widens substantially: a 100% markup is only a 50% margin, and a 300% markup is only a 75% margin. Assuming markup and margin are interchangeable gets more costly the higher your markup runs.
A practical rule
If a target is quoted as a percentage without specifying which formula, ask before pricing off it — the two numbers diverge enough that a misunderstanding here directly affects your actual profit, not just your reporting.