Margin vs. markup — the industry mistake
Retail buyers talk in MARKUP (cost-plus). Finance/accounting talks in MARGIN (share of revenue). Confusing them costs money — a 'keystone' 100% markup only nets a 50% margin.
- • 25% markup = 20% margin
- • 50% markup = 33% margin
- • 100% markup = 50% margin
- • 150% markup = 60% margin
- • 200% markup = 67% margin
Gross vs. net margin
Gross margin = (Revenue − COGS) ÷ Revenue. Net margin = (Revenue − all costs) ÷ Revenue. Gross is a pricing signal; net is a business-health signal. Marketplace sellers often have healthy gross margins but weak net margins because of platform fees.
Pricing for a target margin
Backing into a selling price for a specific margin: Price = Cost ÷ (1 − Target Margin %). This is the ONLY correct formula — a common mistake is Price = Cost × (1 + Target Margin), which is markup, not margin.
Related guides
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Read the guideFAQ
What's the difference between margin and markup?
Margin is profit as % of REVENUE. Markup is profit as % of COST. A $40 cost sold at $100 = 60% margin ($60 ÷ $100) OR 150% markup ($60 ÷ $40). They describe the same deal from different angles.
How do I calculate 60% margin selling price?
Price = Cost ÷ (1 − 0.60) = Cost ÷ 0.40. $40 cost ÷ 0.40 = $100 selling price for a 60% margin.
Is 30% a good profit margin?
For gross margin, 30% is thin in retail (target 40–60%). For net margin, 30% is excellent in most industries — SaaS averages 15–25% net, retail 2–8%.
How do I calculate net profit margin?
(Revenue − COGS − operating expenses − fees − taxes) ÷ Revenue × 100. Everything left after all costs, expressed as a % of revenue.
What's the difference between gross margin and gross profit?
Gross profit is a dollar amount ($60 per unit). Gross margin is a percentage (60% of revenue). Same underlying number, different expression.
How do marketplace fees affect margin?
Subtract them BEFORE calculating net margin. Selling a $100 item with $40 cost on eBay (13.25%): net = $100 − $40 − $13.25 = $46.75. Effective margin drops from 60% gross to 46.75% net.
What is contribution margin?
Revenue − variable costs (COGS + fees), before fixed costs. Tells you how much each sale contributes toward covering fixed costs and eventually profit.
How do I improve profit margin?
Four levers: raise prices, lower COGS (bulk buying, supplier switch), reduce variable fees (annual plan discounts, lower-fee platforms), or reduce fixed cost allocation (higher volume spreads fixed costs thinner).
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last reviewed
July 2026. We re-check every figure on the platform on a rolling quarterly cycle.
Editorial standards
See our editorial policy and disclaimer. Results are estimates, not advice.