Markup vs Margin
These get mixed up constantly, and it costs merchants real money. Markup is how much you add to cost (profit ÷ cost). Margin is how much of the selling price is profit (profit ÷ price). A 50% markup only gives you a 33% margin. They're not the same.
Example
Product costs $20. You sell it for $30. Markup = $10 ÷ $20 = 50%. Margin = $10 ÷ $30 = 33.3%. You told your partner "we mark everything up 50%" and they think you're making 50%. You're not.
Why It Matters
Confusing markup with margin leads to systematic underpricing. If you target a 50% margin but actually price at 50% markup, you're running at 33% margin — and wondering why the numbers never work out at month-end.
Pro Tip
Pick one — margin or markup — and use it consistently across your entire pricing strategy. Margin is better because it tells you what you actually keep per dollar of revenue.
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