Quick answer
Markup measures profit against cost. Margin measures profit against selling price. They are related, but they are not interchangeable.
Why this matters in real pricing
A price can look reasonable until you realise you have been using the wrong percentage language. That matters because margin and markup can lead you to very different conclusions about how healthy the number really is.
The cleanest way to separate them
Markup
Use markup when you are starting from cost and adding enough on top to build a selling price.
Margin
Use margin when you want to judge how much of the final selling price is actually profit.
Worked example in plain English
Imagine something costs you £50 and you sell it for £100. The gross profit is £50, but the two percentages tell different stories because they are measured against different starting points.
Markup asks, “How much profit have I made compared with my cost?” Margin asks, “How much of the final selling price is profit?”
When each number is most useful
- Use markup when building a price from your cost base.
- Use margin when judging how strong the final selling price really is.
- Use both when you want a fuller picture before approving a price.
Common mistakes to avoid
- Using the words as if they mean the same thing.
- Presenting markup as margin in a pricing discussion.
- Looking at only one percentage and assuming the picture is complete.
- Forgetting that a strong-looking markup can still produce a weaker margin than expected.
Best practical habit
Before approving a selling price, check both the markup and the margin. That gives you a clearer view of whether the number works from both directions.
FAQs
Why do people confuse markup and margin?
Because both describe profit in percentage form, and the difference often looks small at first glance. The confusion comes from what each percentage is measured against.
Which one matters more?
Usually both. Markup is helpful when building a price from cost, while margin is better for judging how strong the final price really is.
Can a price have a decent markup but a weaker margin than expected?
Yes. That is exactly why it helps to look at both figures before you decide a price is good enough.