Markup vs margin: why a 50% markup is not a 50% margin
Markup and margin use the same two numbers, cost and price, but divide by different things. Mix them up and you can price a product thinking it earns 50% when it really earns 33%, before fees take their share.
The formulas
Markup % = (price − cost) ÷ cost × 100
Margin % = (price − cost) ÷ price × 100
Markup is measured against what you paid. Margin is measured against what the customer paid. Because price is always bigger than cost for a profitable product, margin is always the smaller percentage.
Quick example
A product costs you $10 and you sell it for $15.
- Markup: ($15 − $10) ÷ $10 = 50%
- Margin: ($15 − $10) ÷ $15 = 33.3%
Conversion chart
| Markup | Gross margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.7% |
| 300% | 75% |
Margin = markup ÷ (1 + markup) Markup = margin ÷ (1 − margin)
Pricing for the margin you want
If you know the margin you need, work backward to the price:
Price = cost ÷ (1 − target margin)
For a $10 cost and a 60% target margin: $10 ÷ 0.40 = $25. A "60% markup" would give you only $16, a margin of 37.5%.
Do not forget fees
Both formulas above give gross figures. Marketplace and payment fees come out of the sale price, so the margin you keep is lower. On a marketplace that takes, say, 10% to 15% of the sale in combined fees, a 50% gross margin can shrink to 35% or 40% before shipping and ads. Check your own channel's current fees in our guides to Etsy fees, Amazon FBA fees, and Shopify profit margin.
Common mistakes
- Quoting markup to a partner or lender who expects margin, or the other way around.
- Using invoice cost instead of full landed cost.
- Applying a "standard" markup to every product even when fees and shipping vary widely by item.
- Judging the business on gross margin alone. See gross vs net profit margin.
Track cost, price, fees, and margin per product in one place and pricing decisions get much easier. Educational content only, not financial or tax advice.
More seller guides
- Etsy fees explained: what Etsy actually takes from each sale
- How to calculate your Shopify profit margin (and what a good one looks like)
- Amazon FBA fees in 2026: what you pay and how to estimate it
- Quarterly estimated taxes for online sellers: a plain-English guide
- How to calculate COGS (cost of goods sold) for your online store
- Reorder point formula for small online shops (with safety stock examples)
- How to track returns and refunds as an online seller (and calculate refund rate)
- How to make a simple monthly profit and loss statement for your online shop
- What to include on an invoice: a checklist for small sellers and makers
- How to price handmade products: a simple formula that covers fees and pays you
- Break-even point for online sellers: formula, example, and how to lower it
- Inventory turnover ratio: how fast your stock actually sells
- Gross vs net profit margin: what each one tells an online seller
- Landed cost: the true cost of a product once it reaches your shelf
SellerSheetKit is not affiliated with Etsy, Shopify, or Amazon. Fee figures are summarized from official sources on the date above and can change; verify against your seller account. Educational content only — not tax, legal, or accounting advice.