From cost and price
Price for a target margin
Last updated 28 August 2026
The distinction that costs people money
Both numbers describe the same profit, but they divide it by different things. Margin divides profit by the selling price; markup divides it by the cost. Buy something for 40 and sell it for 60 and you have made 20 either way — but that is a 33% margin and a 50% markup. The mistake happens when a target margin is applied as a markup: aim for a 40% margin, add 40% to your cost instead, and you land on a 28.6% margin without noticing. On thin-margin products that gap is the difference between a profitable line and a busy one. The second panel here works backwards from the margin you actually want, which is the safer direction to calculate in.
Common questions
What is the difference between margin and markup?
Margin is profit divided by the selling price. Markup is profit divided by the cost. A 50% markup on a cost of 40 gives a price of 60 and a profit of 20 — which is a 33% margin, not 50%.
How do I price for a specific margin?
Divide the cost by one minus the margin. For a 45% margin on a cost of 40, that is 40 ÷ 0.55, or about 72.73. Adding 45% to the cost instead would give 58, which is only a 31% margin.
Can margin be more than 100%?
No. Margin is a share of the selling price, so it can approach 100% but never reach it — that would mean the item cost nothing. Markup has no upper limit, which is another reason the two are easy to confuse.
Should I include shipping and payment fees?
Fold them into the cost per unit if you want the margin to reflect what you actually keep. Leaving them out gives a gross margin, which is useful for comparing products but overstates what reaches the bottom line.