Markup vs margin
What is the difference between markup and margin?
Markup is profit as a share of cost; margin is profit as a share of price. Both use the same dollar profit (price minus cost), so markup is always the bigger percentage. An item that costs $16 and sells for $40 has a $24 profit: a 150.0% markup but a 60.0% margin. To convert, margin = markup ÷ (1 + markup), so a 50% markup is a 33.3% margin, and a 100% markup (doubling cost) is a 50% margin.
Formula: markup = (price − cost) ÷ cost; margin = (price − cost) ÷ price; price for a target margin = cost ÷ (1 − margin).
Worked example: cost $16, price $40: markup = $24 ÷ $16 = 150.0%; margin = $24 ÷ $40 = 60.0%. For a 40% margin on a $16 cost: $16 ÷ 0.60 = $26.67.
Markup to margin conversion table
| Markup on cost | Price on a $10 cost | Margin on price |
|---|---|---|
| 20% | $12.00 | 16.7% |
| 25% | $12.50 | 20.0% |
| 50% | $15.00 | 33.3% |
| 75% | $17.50 | 42.9% |
| 100% | $20.00 | 50.0% |
| 150% | $25.00 | 60.0% |
| 200% | $30.00 | 66.7% |
| 300% | $40.00 | 75.0% |
Math only: margin = markup ÷ (1 + markup); markup = margin ÷ (1 − margin). A margin can never reach 100%, but markup has no upper limit.
Why the difference matters
- Discounts and fees come off the price, so margin is the number that tells you what's left. If you add a 50% markup and then give 20% off, you keep far less than you might expect: on a $10 cost, $15 becomes $12 and the margin drops from 33.3% to 16.7%.
- "Add 30% to cost" is not a 30% margin. A 30% markup is a 23.1% margin. To get a 30% margin you need a 42.9% markup.
- Count your own time as a cost before you measure either one. Otherwise the margin is your pay and the business's profit mixed together.
What Etsy's fees do to your margin
Selling fees come out of the price, so they shrink the margin. Using Etsy's published US fees ($0.20 listing, 6.5% transaction and 3% + $0.25 payment processing) on the same $40 item with free shipping:
| Line | Working | Amount |
|---|---|---|
| Price | Item, free shipping | $40.00 |
| Cost to make | Materials, packaging, your time, overhead share (example) | −$16.00 |
| Etsy fees | $0.20 + 6.5% × $40 + 3% × $40 + $0.25 | −$4.25 |
| Profit | $19.75 | |
| Margin after fees | $19.75 ÷ $40 | 49.4% (vs 60.0% before fees) |
To hit a 40% margin after Etsy fees, divide cost plus the flat fees by 1 minus the percentage fees minus the margin: ($16 + $0.20 + $0.25) ÷ (1 − 6.5% − 3.0% − 40%) = $32.57, versus $26.67 with no fees. Offsite Ads fees, if a sale comes through one, would come on top; see how much Etsy takes per sale.
Last verified November 2, 2026 against Etsy Help: What are the fees and taxes for selling on Etsy?, Etsy Help: Payment processing fees by country. Fee change tracker · How we verify
The $16 cost and $40 price are illustrations. Fees are Etsy's US rates for a US seller; other countries differ. If you charge shipping, the transaction and processing fees apply to it too (see Etsy fees on shipping).
Do the math for your own items or jobs
The handmade pricing calculator solves for the Etsy price that leaves your chosen margin after fees, and the job profit calculator does the same for a cleaning, lawn care or trade job, including the price for a target margin. For fees on other platforms, see the Stripe, Square and Shopify calculators.
Questions
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a $10 cost gives a $15 price and a 33.3% margin. A 50% margin needs a 100% markup: a $10 cost sold at $20.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). For example, a 25% markup is 0.25 ÷ 1.25 = 20% margin. To go the other way, markup = margin ÷ (1 − margin).
How do I price for a target margin?
Price = cost ÷ (1 − target margin). For a $16 cost and a 40% margin that is $16 ÷ 0.6 = $26.67. If the platform takes percentage and flat fees, use (cost + flat fees) ÷ (1 − percentage fees − margin).
Which should I use, markup or margin?
Margin is usually more useful for decisions because fees, discounts and refunds are all a share of the price. Markup is handy as a quick pricing rule. Just don't mix them up.
What is a good profit margin for a small business?
We don't publish a benchmark because we haven't found an official source for one. Compare your own products or jobs against each other, and make sure the margin is measured after fees and after paying yourself.
Do Etsy fees count in the margin?
Yes, if you want the real margin. On a $40 sale with free shipping, US Etsy fees (listing, 6.5% transaction, 3% + $0.25 processing) come to $4.25, which takes this example from a 60.0% margin to 49.4%.
General information, not tax, legal or accounting advice. Rates change: check the linked official source before you rely on a number. Not yet reviewed by a CPA or EA.
Related: Handmade pricing calculator · Job profit calculator · Job costing for service businesses · How much Etsy takes per sale · Etsy fee calculator · Bookkeeping for Etsy sellers · All answer guides