Markup is how much a seller adds on top of their buy-in cost to set the selling price, while margin is the profit that is left once costs are taken out, usually expressed against the selling price. They describe the same profit from two different starting points, which is exactly why they get muddled.
The core difference
Markup is worked out on the cost price; margin is worked out on the selling price.
- markup — the percentage or amount by which a seller hikes up their buy-in price when setting the selling price: a 50% markup on a £10 item prices it at £15.
- margin — the profit left after costs, seen as a share of the selling price: the store operates on a thin profit margin.
How to tell them apart
The trick is to ask what the percentage is measured against. Markup is added on top of the cost price. Margin is taken as a slice of the final selling price. That is why a 50% markup and a 50% margin are never the same number, even on an identical sale.
The confusion shows up constantly in small business pricing, where someone sets a markup thinking it matches their target margin and ends up pricing stock too low to hit their profit goals.
