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Markup to margin conversion table
The pairs that come up over and over in real pricing conversations.
| If your markup is | Your margin is | On a $60 cost, you charge |
|---|---|---|
| 10% | 9.09% | $66.00 |
| 20% | 16.67% | $72.00 |
| 25% | 20.00% | $75.00 |
| 50% | 33.33% | $90.00 |
| 100% (keystone) | 50.00% | $120.00 |
| 200% | 66.67% | $180.00 |
Formulas: margin = markup / (100 + markup) x 100; markup = margin / (100 - margin) x 100. Price from markup = cost x (1 + markup). Price from target margin = cost / (1 - margin).
Frequently asked questions
What is the difference between markup and margin?
Both measure profit, but against different bases. Markup = (price - cost) / cost. Margin = (price - cost) / price. Sell a $60 item for $100: the markup is 66.67% but the margin is 40%. Same sale, two different percentages, and the markup is always the bigger number.
How do I convert markup to margin?
Margin = markup / (100 + markup) x 100. A 50% markup gives a 33.33% margin. To go the other way: markup = margin / (100 - margin) x 100. A 40% margin needs a 66.67% markup.
Why does adding my target margin to cost give the wrong price?
This is the classic mistake. A $60 cost with a 40% margin target priced as $60 x 1.40 = $84 actually yields a 28.6% margin, not 40%. To hit a margin target you must divide, not multiply: price = cost / (1 - margin), so $60 / 0.60 = $100.
Which should I use for pricing, markup or margin?
Use margin for targets and financial goals, because margin is profit as a share of revenue, which is how businesses measure profitability. Use markup as the mechanics of getting there from a supplier cost. Set the margin goal first, then compute the required markup with the calculator above.
What is keystone pricing?
Keystone is a 100% markup: doubling the cost. It produces exactly a 50% margin. It is a common retail rule of thumb, but check it against your actual margin target rather than assuming 50% is right for your business.
Can margin ever be higher than markup?
No, for any profitable sale. Because price is always bigger than cost, profit is a smaller share of price than of cost. Margin is always below the equivalent markup, and the gap widens as the percentages grow.
Guides
- "I Want a 50% Margin": The Markup Mistake Costing You 17 Points of Profit
The most common pricing error in small business, worked through with real numbers, and the one-line fix.
- Cost-Plus Pricing Done Right: Price From Your Target Margin
How to build a pricing floor from cost plus overhead, translate a margin target into a price, and when to price above the floor.