Profit margin and markup are different

Start with the same profit

If an item costs 80 and sells for 100, the difference is 20. Both margin and markup describe that difference, but they divide it by different amounts.

Put this guide into practice with the Profit Margin. Review the tool’s inputs, example and limitations alongside your result.

Margin uses selling price

Margin = (selling price − cost) ÷ selling price × 100. In this example, 20 ÷ 100 gives a margin of 20%.

Markup uses cost

Markup = (selling price − cost) ÷ cost × 100. Here, 20 ÷ 80 gives a markup of 25%. A 25% markup therefore does not mean a 25% margin.

Decide what your cost includes

The calculator only knows the costs you enter. You may need to include packaging, payment fees, delivery subsidies, or other relevant expenses when preparing your own estimate. This simple calculation is not a full profit-and-loss statement.

Check unusual cases

A zero selling price makes margin undefined. A zero cost makes markup undefined. Selling below cost gives a negative result. ToolMallow displays these cases explicitly rather than replacing them with a misleading zero.

Use the Profit Margin tool for a quick comparison, then review your full records before setting business prices.