Field notes
Choose the percentage before you choose the price
A price can have both a margin and a markup. They describe the same gross profit, but compare it with different amounts. Confusing them matters most when you use a percentage to set a new price.
What does 25% mean for a $60 cost?
25% markup
$75.00 selling price
Add $15 to the $60 cost. That $15 profit is 20% of the selling price.
25% margin
$80.00 selling price
Keep $20 after the $60 cost. That profit is a quarter of the selling price.
Both instructions use 25%, yet they produce prices $5 apart. If you intended to keep a quarter of each sale after covering cost, adding 25% to cost would leave you below your target.
Make the pricing instruction clear
Before applying a percentage from a supplier, spreadsheet, or pricing policy, check what it refers to. “Add 25% to cost” describes markup. “Keep 25% of the selling price as gross profit” describes margin.
Write out the basis: “25% markup on cost” or “25% gross margin on selling price.” For a profitable sale with a positive cost, markup is higher than margin.
Choose your next step
If you already know your cost and price, use the calculator above to check both percentages. If you know the margin you want, find a target selling price instead.
Keep cost and price on the same basis: one product, one service, or the same complete order. A percentage alone cannot tell you whether overhead, selling fees, and income tax are covered; expenses outside the entered cost still need covering.