Review: Margin vs. Markup
Confusing Margin with Markup is the primary cause of small business insolvency. They are not interchangeable.
- Margin: (Price - Cost) / Price. This is your profit as a percentage of the selling price. (e.g. You want to keep 30 cents of every dollar sold).
- Markup: (Price - Cost) / Cost. This is the percentage you add on top of your cost. (e.g. You want to mark up a product by 50%).