Money & Pricing Tables
Markup and Margin Conversion Table
Markup and margin use the same two numbers and get different answers, which is why pricing conversations go wrong so often. Markup divides profit by cost. Margin divides profit by price. If you buy at $40 and sell at $60, your markup is 50% and your margin is 33.3%, and both statements are true.
The gap is not a rounding error, it widens as the numbers grow. At a 100% markup the margin is 50%. At a 300% markup the margin is 75%. Any business that sets prices by marking up cost and then reports margin against a target will always appear to fall short, because the target was expressed in the other unit.
The tables below convert in both directions and add the price multiplier, which is the most useful column in practice: it is what you actually type into a pricing sheet. A 60% margin requires a 2.50× multiplier, meaning every dollar of cost becomes two dollars fifty of price.
The reason this matters more than it looks is margin compression. If you set a price at a 30% markup believing it is a 30% margin, you are really earning 23.1%, and any discount you then offer comes straight out of that smaller number. A 10% discount on a 23.1% margin leaves 14.5% — you have given away almost 40% of your profit to move the price 10%.
Markup to gross margin
| Markup on cost | Gross margin | Price multiplier | Profit on a $100 cost |
|---|---|---|---|
| 5% | 4.8% | 1.05× | $5 |
| 10% | 9.1% | 1.1× | $10 |
| 15% | 13% | 1.15× | $15 |
| 20% | 16.7% | 1.2× | $20 |
| 25% | 20% | 1.25× | $25 |
| 30% | 23.1% | 1.3× | $30 |
| 33.3% | 25% | 1.33× | $33.3 |
| 40% | 28.6% | 1.4× | $40 |
| 50% | 33.3% | 1.5× | $50 |
| 60% | 37.5% | 1.6× | $60 |
| 75% | 42.9% | 1.75× | $75 |
| 100% | 50% | 2× | $100 |
| 150% | 60% | 2.5× | $150 |
| 200% | 66.7% | 3× | $200 |
Markup is measured against cost; margin is measured against price. The same dollar profit is always a smaller percentage of price than of cost.
Gross margin to required markup
| Target margin | Required markup | Price multiplier | Price for a $40 cost |
|---|---|---|---|
| 10% | 11.1% | 1.11× | $44.44 |
| 15% | 17.6% | 1.18× | $47.06 |
| 20% | 25% | 1.25× | $50 |
| 25% | 33.3% | 1.33× | $53.33 |
| 30% | 42.9% | 1.43× | $57.14 |
| 35% | 53.8% | 1.54× | $61.54 |
| 40% | 66.7% | 1.67× | $66.67 |
| 45% | 81.8% | 1.82× | $72.73 |
| 50% | 100% | 2× | $80 |
| 55% | 122.2% | 2.22× | $88.89 |
| 60% | 150% | 2.5× | $100 |
| 65% | 185.7% | 2.86× | $114.29 |
| 70% | 233.3% | 3.33× | $133.33 |
| 75% | 300% | 4× | $160 |
| 80% | 400% | 5× | $200 |
A 50% margin needs a 100% markup — double the cost. A 75% margin needs 300%, because price is four times cost.
Everyday equivalents
| Cost | Sell price | Markup | Gross margin | Gross profit |
|---|---|---|---|---|
| $40 | $60 | $20 | 50% | 33.3% |
| $40 | $80 | $40 | 100% | 50% |
| $40 | $100 | $60 | 150% | 60% |
| $25 | $50 | $25 | 100% | 50% |
| $25 | $40 | $15 | 60% | 37.5% |
| $60 | $100 | $40 | 66.7% | 40% |
| $12 | $20 | $8 | 66.7% | 40% |
| $80 | $100 | $20 | 25% | 20% |
Buy for $40, sell for $60: that is a 50% markup but only a 33.3% gross margin. Both are correct; they answer different questions.
How to Use These Tables
- Markup to margin: divide the markup rate by (1 + markup rate). A 40% markup gives 0.40 ÷ 1.40 = 28.6% margin.
- Margin to markup: divide the margin rate by (1 − margin rate). A 40% margin needs 0.40 ÷ 0.60 = 66.7% markup.
- Use the multiplier for pricing sheets. Price = cost × multiplier, and the multiplier is simply 1 + markup rate.
- Never compare a markup figure from a supplier with a margin figure from your accountant without converting one of them first — that is the single most common source of margin shortfalls in small retail.
Common Questions
Is a 50% markup the same as a 50% margin?
No. A 50% markup means price is 1.5× cost, which is a 33.3% margin. To get a 50% margin you need a 100% markup — price must be double the cost.
Which one should I use to set prices?
Set prices from a target margin, because margin is what survives to cover overheads. Industry benchmarks — a grocery retailer at 25–30%, a software company at 70–80% — are quoted as gross margin, not markup.
Why is margin always lower than markup?
Because margin's denominator is the larger number. Profit divided by cost is always a bigger fraction than the same profit divided by price, since price is cost plus profit. The two only converge when profit is zero.
Does markup include shipping and fees?
Not unless you put them in the cost. A 50% markup on a $40 product that costs $8 to ship is really a 25% markup on the $48 landed cost, and a 20% margin rather than 33%.
How do I convert a 2.5× price multiplier to a margin?
Subtract 1 to get the markup (1.5, or 150%), then divide by the multiplier: 1.5 ÷ 2.5 = 60% margin. The shortcut is (multiplier − 1) ÷ multiplier.
More Money & Pricing Tables
Sources
- Gross margin and markup — Financial accounting basics — U.S. Small Business Administration
- Pricing your products — U.S. Small Business Administration
- Retail and food services — gross margin benchmarks — U.S. Census Bureau, Annual Retail Trade Survey
Filed with Finance calculations.