The Difference Between Margin and Markup
A frequent confusion among business operators is the difference between margin and markup. While both express profit, they use different denominators:
- Gross Margin: The percentage of selling price that is profit:
(Profit / Revenue) × 100. Margin can never exceed 100%. - Markup: The percentage added onto the original cost to establish the retail price:
(Profit / Cost) × 100. Markup can easily exceed 100%, 200%, or more.