Markup vs Profit Margin for Makers & Crafters
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.
Quick comparison cheat sheet
• 100% Markup = 50% Profit Margin (Price = 2× Cost)
• 150% Markup = 60% Profit Margin (Price = 2.5× Cost)
• 300% Markup = 75% Profit Margin (Price = 4× Cost)
Never confuse the two when calculating price targets after marketplace fees.