Business Guide
How to Calculate Profit Margin and Markup
Learn the difference between profit margin and markup, and how to use both when pricing products, services, or freelance work.
Profit margin and markup are related, but they are not the same thing. Mixing them up can make your pricing look better than it really is.
Profit margin compares profit to revenue. If you sell something for $100 and keep $30 after costs, your profit margin is 30%.
Markup compares profit to cost. If something costs $70 and you sell it for $100, the markup is about 42.9% because the $30 profit is compared to the $70 cost.
For business planning, margin is often better for understanding how profitable a sale is. Markup is useful when setting a selling price from a known cost.
Good pricing should include direct costs, labor, overhead, taxes, fees, and a cushion for profit. If your margin is too thin, one surprise expense can wipe out the profit.
Try the free calculator
Use this Goodfolk Toolbox calculator to make the planning step faster.
Open Profit Margin Calculator