Markup vs Profit Margin for Makers
Markup is profit divided by cost. Margin is profit divided by selling price. Using one word for both will misprice your work.
The two formulas
Markup = (Price − Cost) / Cost. If something costs $10 and sells for $20, markup is 100%.
Profit margin = (Price − Cost) / Price. The same $10 cost and $20 price is a 50% margin. The profit dollars are identical; the percentages are not.
Which number should you target?
Margin answers “what share of the customer’s payment do I keep?” Markup answers “how much am I adding on top of cost?” Wholesale conversations often use markup or keystone (2× cost). Retail planning is often easier in margin because fees are also a percent of price.
If someone says “I want 50%” ask 50% of what. Fifty percent markup on $10 is a $15 price. Fifty percent margin on $10 is a $20 price.