Margin & Markup Sheet

Same profit, different denominators. Markup divides by cost; margin divides by price.

BFCBrilliance · bfcbrilliance.com/tools/profit-margin-vs-markup-calculator

The conversions

MARGIN: (price − cost) ÷ PRICE
MARKUP: (price − cost) ÷ COST
Margin from markup: markup ÷ (1 + markup)
Markup from margin: margin ÷ (1 − margin)
PRICE for a target margin: cost ÷ (1 − margin) — NOT x (1 + margin)
20% markup: = 16.7% margin
50% markup: = 33.3% margin
50% MARGIN needs: a 100% markup
⚠ 80% margin needs: a 400% markup — the gap explodes

Products priced

Item	Cost	Price	Margin %	Markup %	Profit

This product

Product
Date
Direct cost
Price
MARGIN
MARKUP
Profit per sale
Target margin
PRICE NEEDED
Price if applied as markup
SHORTFALL per sale
Units a month
Shortfall a month

Before setting a price

Decided WHICH number you are quoting — margin or markup
Converted it rather than assuming the two are close
Priced with cost ÷ (1 − margin), not cost x (1 + margin)
Checked what the resulting margin actually is
Remembered overheads come out of the margin, not the markup
Multiplied any shortfall by monthly volume before dismissing it
Checked the gap again if margins are high — it widens fast
Anything material talked through with an accountant

The error only runs one way

Markup is always the larger number, so confusing the two means you charged LESS than you meant to — never more. It does not announce itself: the sale happens, the customer is happy, and the shortfall shows up only as a business that is busier than it is profitable. Multiply the per-sale gap by your monthly volume before deciding it is small.

Set with markup, judge on margin

Markup is a convenient mechanism for getting from a known cost to a price, and there is nothing wrong with using it — provided you know what margin it produces. Margin is what the business runs on, because fixed costs, break-even and surviving a bad month are all measured against revenue rather than cost of goods.