Margin vs markup: the key difference
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost price. The same deal always shows a higher markup than margin — they are two ways of describing the same profit from different reference points.
Per unit
A simple per-unit calculation. Real margins should account for all costs, not just unit cost.
Grow your profitFrequently asked questions
What is the difference between margin and markup?
Margin is profit expressed as a percentage of the selling price. Markup is profit expressed as a percentage of the cost price. The same profit looks different as each: a £30 profit on a £100 sale is a 30% margin but a 75% markup on a £40 cost. The confusion between the two is extremely common and can lead to pricing errors. When someone says 'we add a 50% markup', they do not mean 50% of the sale goes to profit — they mean the price is 1.5 times the cost.
How do you calculate profit margin?
Profit margin = ((selling price − cost) / selling price) × 100. So if you pay £40 for something and sell it for £100, your profit is £60 and your margin is 60%. This is gross profit margin and does not account for overheads. Net profit margin subtracts all costs including operating expenses, which gives a more realistic picture of what you actually keep.
What is a good profit margin?
It depends entirely on the industry. Grocery retail might operate on margins of 2 to 5%. Software and digital products often see margins above 70%. Service businesses vary widely: a sole trader with low overheads might keep 40% or more; a staffed agency might keep 15 to 25%. The most useful benchmark is your own trend over time and whether the margin supports the business costs you need to sustain growth.
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