Business Guide

Profit Margin vs Markup

Margin and markup use different denominators, so they should not be treated as the same percentage.

Margin

Margin compares profit with selling price or revenue.

Markup

Markup compares the increase in selling price with cost.

Example

If an item costs 50 and sells for 100, markup is 100% while gross margin is 50%.

Practical takeaway

Use the metric that matches the business question you are trying to answer. When several metrics describe different stages of the same workflow, compare them together rather than optimizing one in isolation.