Margin vs. Markup: What's the Difference?
Both margin and markup use the same inputs (cost and revenue), but they represent different perspectives of business growth.
1. Gross Margin
Margin is the percentage of the **selling price** that is profit. If you sell an item for $100 and it cost $70 to make, you have a $30 profit. Your margin is 30%.
Margin = (Revenue − Cost) / Revenue
2. Markup
Markup is the percentage of the **cost price** that is added to reach the selling price. Using the same $100 sale and $70 cost example, your markup is 42.8% ($30 profit / $70 cost).
Markup = (Revenue − Cost) / Cost
Common Business Margins by Industry
| Industry | Typical Gross Margin |
|---|---|
| SaaS / Software | 70% – 90% |
| Retail (Clothing) | 45% – 55% |
| Restaurants | 60% – 70% (COGS) |
| Automotive | 15% – 20% |
Fact: It is mathematically impossible to have a gross margin of 100% or higher (unless cost is zero), but a markup can be any percentage.