Margin (vs Markup)
Margin is profit expressed as a percentage of the selling price.
Margin measures what share of the selling price is profit: a $125 sale with $100 cost has a $25 profit and a 20% margin. It is the figure most businesses watch, because it shows profitability relative to revenue. Margin is always lower than the equivalent markup on the same transaction — the distinction matters when setting prices.
Example
Selling at $200 with $150 cost gives $50 profit — a 25% margin (and a 33% markup).
Related terms
Frequently asked questions
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). So a 25% markup converts to a 20% margin. Going the other way: markup = margin ÷ (1 − margin).
Why do businesses track margin instead of markup?
Because margin relates profit to revenue — the number in the accounts. A 20% margin means 20 cents of every sales dollar is profit, which is directly useful for planning.
More glossary terms
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