Margin vs markup — the difference that costs money
Margin is profit as a share of the selling price: (price − cost) ÷ price. Markup is profit as a share of the cost: (price − cost) ÷ cost. A product bought for $60 and sold for $100 has a 40% margin but a 66.7% markup. Confusing the two is one of the most expensive mistakes in small business pricing.
How to price for a target margin
Decide the margin you need first, then work backwards: price = cost ÷ (1 − margin). With a $60 cost and a 40% margin target, the price must be $60 ÷ 0.60 = $100. Use the "Price from margin" tab above — it does this instantly.
What margin should you aim for?
- Retail: typically 20–40% gross margin.
- Restaurants: 60–70% margin on food items is common.
- Digital products & software: 80%+ margins are normal.
Benchmark against your own industry and competitors — and always price from margin, not markup, so your numbers match your accounting.