Margin vs markup
Both start from the same profit: price minus cost. Margin divides it by the price; markup divides it by the cost. A $45 product that costs $18 has $27 profit, a 60% margin and a 150% markup.
Mixing them up is a common pricing mistake. If you want a 50% margin and add 50% to your cost, you end up with only a 33% margin.
The formulas
Margin = (price − cost) ÷ price × 100. Markup = (price − cost) ÷ cost × 100. Price for a target margin = cost ÷ (1 − margin). For an $18 cost at a 40% margin: $18 ÷ 0.6 = $30.
- 25% markup = 20% margin
- 50% markup = 33.3% margin
- 100% markup = 50% margin
- 150% markup = 60% margin
- 200% markup = 66.7% margin
What to count as cost
Include everything it takes to sell one unit: materials, packaging, shipping you cover, and platform and payment fees. Leaving out a 3% card fee or a $4 postage label can quietly turn a good margin into a thin one.
What's a good margin?
It depends on what you sell. Digital products like presets, templates and courses often run 80% or more, since each extra copy costs almost nothing. Handmade goods often aim for 50% to 70% to pay for your time. Resold physical products tend to sit lower, around 20% to 50%.
Frequently asked questions
How do I calculate profit margin?
Subtract cost from price, divide by price, and multiply by 100. A $40 item that costs $25 has a 37.5% margin.
What's the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. The same sale always has a higher markup than margin.
How do I price for a 50% margin?
Double your cost. The general formula is cost ÷ (1 − target margin), so an $18 cost at 50% is $36.
Can profit margin be over 100%?
No. Margin tops out just under 100% because profit can't exceed the price. Markup has no limit; 300% markup is a 75% margin.