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Markup vs Margin Calculator: Calculate markup vs margin in Seconds

Calculate and compare markup vs margin. Avoid confusion. This tool helps you calculate, understand, and optimize this metric for your business.

By Veira Finance Expert, Finance Advisor at VeiraPublished June 2024Updated June 2024
Calculator
Result
Markup 42.9% | Margin 30.0%
Cost priceKES 700
Selling priceKES 1,000
Profit per unitKES 300
Markup (profit ÷ cost)42.9%
Margin (profit ÷ price)30.0%

The two are not the same number and mixing them up is the most common pricing error in retail. A 43% markup is a 30% margin. Price from cost using markup; judge the health of the business using margin.

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Markup and margin are not the same number

Markup is profit divided by cost. Margin is profit divided by the selling price. Because the denominators differ, the same shilling of profit produces two different percentages, and confusing them is the most common pricing error in Kenyan retail.

The practical consequence is that a trader aiming for a 30% margin who applies a 30% markup ends up at roughly 23% margin instead, and wonders where the money went. Price from cost using markup; judge the health of the business using margin.

Which one to use when

Use markup at the point of pricing, because you start from what the item cost you. Use margin when comparing products, branches or months, because margin is comparable across items with very different cost prices.

If a supplier raises a cost price and you keep the same selling price, your markup and your margin both fall, but the margin is the one that tells you whether the business still covers rent and salaries.

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Worked examples

Item costing KES 700, sold at KES 1,000
  • Profit KES 300
  • Markup 42.9% (300 ÷ 700)
  • Margin 30.0% (300 ÷ 1,000)
The mistake this prevents
  • Aiming for a 30% margin
  • Applying a 30% markup to a KES 700 cost gives KES 910
  • That is a 23.1% margin, not 30%

Frequently asked questions

What is the difference between markup and margin?
Markup is profit divided by cost. Margin is profit divided by the selling price. The same profit gives two different percentages because the denominators differ, and markup is always the larger of the two.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup is a 33.3% margin; a 100% markup is a 50% margin.
Which should I price with?
Markup, because you start from what the item cost you. Use margin to compare products, branches and months, since margin is comparable across items with very different costs.
Why does my margin fall when my supplier raises prices?
Because the cost rises while the selling price does not. Both markup and margin fall, and margin is the one that tells you whether the business still covers its fixed costs.
Is a high markup always good?
Not if it costs you volume. A high markup on stock that sits is worse than a lower markup on stock that turns, which is why markup should be read alongside inventory turnover.

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