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Margin and markup
Margin vs. markup (same numbers, different readings)
| Cost | Price | Margin | Markup |
|---|---|---|---|
| $50.00 | $100.00 | 50.0% | 100% |
| $60.00 | $100.00 | 40.0% | 67% |
| $70.00 | $100.00 | 30.0% | 43% |
| $100.00 | $150.00 | 33.3% | 50% |
| $100.00 | $200.00 | 50.0% | 100% |
| $100.00 | $300.00 | 66.7% | 200% |
Margin is not markup, and mixing them up is expensive
Margin = profit ÷ price × 100 · Markup = profit ÷ cost × 100 · Price = cost ÷ (1 − target margin)
A 100% markup (doubling your cost) yields only a 50% margin. The classic retail mistake: wanting a "30% margin" and adding 30% on top of cost. That is markup, and it delivers just a 23% margin. For a true 30% margin, price = cost ÷ 0.70. Remember this is gross margin; taxes, card fees and shipping come out of it before net profit.
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