Markup vs Margem

Markup and margin: conversion and concept

Markup sits on top of cost: markup = (price − cost) / cost. Margin, on the other hand, is taken from the selling price: margin = (price − cost) / price. To move between the two, use margin = markup / (1 + markup) and markup = margin / (1 − margin). Take a quick example: cost R$ 100, price R$ 150. That's a 50% markup and a 33.3% margin. People trip up by reaching for margin when they actually need markup, which is inappropriate when pricing from cost. Slapping "30% margin" onto a cost lands you at a different price than "30% markup" would.

Applications

You'll lean on this for retail pricing, e-commerce, restaurant menus, deciding whether a promotion makes sense, and weighing one supplier against another. A few rough benchmarks from Brazil: fashion retail tends to run markup ×2.5–3, while supermarkets sit around markup ×1.3–1.5. Restaurants usually mark up raw food cost by ×3–4.

FAQ

Why is markup always larger than margin? The denominators differ. Markup divides by cost, which is smaller than the price that margin divides by. So a 100% markup only works out to a 50% margin.

Which one should I use to price a product? If you're starting from cost, go with markup. Multiply cost by (1 + markup) and you have the price.

Does a 20% discount destroy margin? Pretty much. If you're working on a 33% margin, knocking off 20% eats roughly two-thirds of the profit. Re-run the markup/margin math before you commit to any promotion.