How it works
Margin and markup describe the same profit from two sides. Margin divides profit by the selling price, so it can never reach 100%. Markup divides profit by the cost, so it can be any size. ROI compares what you got back with what you put in; if you add a holding period, it is also turned into a compound annual rate so investments of different lengths can be compared. Works with any currency.
Margin = (price − cost) ÷ price · Markup = (price − cost) ÷ cost
ROI = (returned − invested) ÷ invested · Annualized = (returned ÷ invested)^(1 ÷ years) − 1
Markup vs margin at a glance
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
| 200% | 66.7% |
Tips
- To hit a target margin, divide the cost by (1 − margin). A 40% margin on a cost of 60 needs a price of 100, not 84 (which is a 40% markup).
- Use landed cost (product, shipping, duties, payment fees) for an honest margin, not just the supplier price.
- ROI without a time frame can mislead: 30% over 2 years is about 14% a year.
Standards and sources
- Glossary of business financial terms (gross profit margin) · U.S. SBA
- Profit · Investor.gov (U.S. SEC)
- Annual return · Investor.gov (U.S. SEC)
Last reviewed October 15, 2026
Frequently asked questions
What is the difference between margin and markup?
Both use the same profit. Margin is profit ÷ selling price; markup is profit ÷ cost. Buying at 60 and selling at 100 is a 40% margin but a 66.7% markup.
How do I price a product for a 30% margin?
Divide the cost by 0.70. A cost of 35 needs a price of 50. Choose “Price from margin”, enter the cost and 30%.
How is annualized ROI calculated?
(final value ÷ amount invested)^(1 ÷ years) − 1. Turning 10,000 into 13,000 over 2 years is a 30% ROI, or about 14.0% a year.
Can margin be over 100%?
No. Margin is a share of the selling price, so it stays below 100%. Markup can exceed 100%.