Markup and margin sound alike and are not the same number. Mixing them up is a common reason sellers price too low. A 25% markup on a Rs 800 product gives a Rs 1,000 price, which is a 20% margin.
Use the first mode if you already know your price. Use the second if you know the margin you want and need the price.
How it works
- Profit = selling price − cost.
- Markup = profit ÷ cost.
- Margin = profit ÷ selling price.
- Selling price for a target margin = cost ÷ (1 − margin).
A worked example
Example numbers only: a product costs you Rs 800 in total and you sell it for Rs 1,000. Profit is Rs 200, markup is 25% and margin is 20%.
If you want a 30% margin on the same Rs 800 cost, the price is 800 ÷ 0.7, about Rs 1,143.
Common questions
Which should I use, markup or margin?
Margin tells you how much of each sale you keep, so it's the easier number to compare between products. Markup is useful when you add a percentage to your cost.
What cost should I enter?
Everything it costs you to deliver one order: the product, delivery, fees, packaging and anything else. If you leave costs out, the margin looks better than it is.
Why is the margin always lower than the markup?
Because it's divided by the selling price, which is bigger than the cost.