# What is Markup vs Margin?

What is Markup vs Margin? Markup: how much was added above cost. COGS $14 + 100% markup = $28 price. Margin: the profit percentage of the price.

## How it works in practice

Markup and margin sound similar but are completely different. A 50% markup ≠ a 50% margin. A 100% markup = a 50% margin. The confusion leads to mispricing. A store that wants a '40% margin' but calculates a 40% markup ends up with a 28.6% margin — a loss on every sale.

## Related metrics

- Gross Margin — what people usually discuss in eCommerce
- COGS — the basis for both calculations
- Pricing Strategy — markup/margin determines pricing
- Break-Even — depends on margin, not markup

## Common misconception

'A 100% markup means doubling your money.' True that the price doubles the COGS. But margin = 50% (not 100%). Store owners who say 'our markup is 200%' actually have a 66.7% margin. Impressive-sounding — but after 30% marketing spend and 20% salaries, net margin could be just 10%.

## How to fix it

Confusing markup and margin? (1) Margin formula: (Price - COGS) / Price × 100, (2) Markup formula: (Price - COGS) / COGS × 100, (3) Exercise: COGS $17, price $28. Margin: 40%. Markup: 66.7%, (4) For internal management, always use margin — because that's what remains from the sale.

## Real-world example

Apparel wholesaler: 'we work on an 80% markup.' COGS $13 → price $23. Margin: 44%. After: marketing 20%, salaries 18%, overhead 8% = 46% expenses. Net margin: -2%. '80% markup' sounds great. A 44% margin is the reality.

## Where to start

Set a policy: all internal reports use margin (not markup). Explain the difference to the team. Price based on a target net margin, not a target markup.

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Category: Finance · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/markup-vs-margin