Profit margin vs markup: why 25% gives two different prices
DailyUseKit · Updated 4 October 2026
The difference
Margin measures profit as a share of the selling price. Markup measures profit as a share of cost. They answer different questions, so entering the same percentage does not give the same selling price.
A worked example
Suppose one item costs 90 in your chosen currency, including packaging and transport. A 25% markup adds 22.50 to the cost: the selling price is 112.50. Profit is 22.50, but the margin is only 20%, because 22.50 ÷ 112.50 = 0.20. For a 25% margin, divide 90 by 0.75. The selling price is 120 and profit is 30.
The formulas
Markup price = cost × (1 + markup ÷ 100). Margin price = cost ÷ (1 − margin ÷ 100). To convert a markup percentage into a margin percentage, use markup ÷ (100 + markup) × 100. To convert margin into markup, use margin ÷ (100 − margin) × 100.
Use the right target
Our selling-price calculator asks for margin. Enter the total cost of one item and the share of its selling price you want to keep before expenses not included in that cost. If your target is “add 25% to cost”, use the markup formula instead. A margin of 100% cannot produce a finite selling price when cost is positive.
Check the price in practice
A formula does not tell you what customers will pay. Compare prices for similar products, include costs you actually incur, and check how many sales you need to cover daily expenses. If you round a suggested price, calculate the margin again using the rounded price. A rounded-down selling price can reduce your profit below the target.