Tool · calculator
Markup vs margin calculator
A 40% markup is a 28.6% margin. Convert one into the other, price a part both ways, and see the gross profit each answer leaves.
What you walk away with
- Outcome
- The margin behind any markup, the markup needed for any margin, and a printable conversion table.
- Time
- About 4 minutes
A 40% markup is a 28.6% margin. Both describe the same gross profit on the same part, measured against different bases: markup against your cost, margin against the selling price. The calculator below converts either one into the other and prices a part both ways.
Key takeaways
- Margin is gross profit divided by price. Markup is gross profit divided by cost.
- Margin is always the smaller of the two percentages on the same sale.
- Margin equals markup divided by one plus markup. That single line ends the confusion.
- Doubling a cost is a 100% markup and a 50% margin.
Markup and margin calculator
A cost and a price, both ways round. Defaults are a diesel water pump at jobber cost.
What the supplier invoices you, before freight.
What goes on the customer's line.
The arithmetic
- Gross profit
- $297.36 − $212.40 = $84.96
- Markup
- $84.96 ÷ $212.40 = 40.00%
- Margin
- $84.96 ÷ $297.36 = 28.57%
Convert one into the other
Type 40 for a forty percent markup.
Type 40 for a forty percent margin.
The arithmetic
- Markup to margin
- 0.4 ÷ (1 + 0.4) = 28.57%
- Margin to markup
- 0.4 ÷ (1 − 0.4) = 66.67%
The conversion, once, for the wall
| Markup | Multiplier | Margin | $100 cost sells for |
|---|---|---|---|
| 25.0% | 1.25 | 20.0% | $125.00 |
| 30.0% | 1.3 | 23.1% | $130.00 |
| 35.0% | 1.35 | 25.9% | $135.00 |
| 40.0% | 1.4 | 28.6% | $140.00 |
| 50.0% | 1.5 | 33.3% | $150.00 |
| 66.7% | 1.6667 | 40.0% | $166.67 |
| 80.0% | 1.8 | 44.4% | $180.00 |
| 100.0% | 2 | 50.0% | $200.00 |
| 150.0% | 2.5 | 60.0% | $250.00 |
| 200.0% | 3 | 66.7% | $300.00 |
Doubling a cost is a 100% markup and a 50% margin. Those are the same transaction described from two sides, so a shop that quotes margin to a supplier and markup to itself will overstate what it keeps every single time.
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Which base is each one measured against?
Take a part that costs you $100 and sells for $140. Gross profit is $40 either way, and the two percentages come from choosing what to divide it by.
Divide $40 by the $100 cost and you get 40%, which is markup. Divide $40 by the $140 price and you get 28.57%, which is margin. The sale is identical in both lines and only the denominator moved.
The Internal Revenue Service reports on the price side. Publication 334 has a small business figure its net receipts first, then "subtract the cost of goods sold (line 4) from net receipts (line 3)" to reach gross profit. Its own worked illustration runs $400,000 of gross receipts down to $385,060 of net receipts, and cost of goods sold of $288,140 leaves $96,920 of gross profit. Every percentage read off that statement is measured against a sale, which makes it a margin. Your books speak margin whether or not your pricing table does.
Why is 40% markup only a 28.6% margin?
Because the price you divided by is bigger than the cost you multiplied by. Formally, margin equals markup over one plus markup, so 0.40 over 1.40 gives 0.2857.
The gap widens as the numbers climb. At a 20% markup the margin is 16.7%, a difference of three points. At a 100% markup the margin is 50%, a difference of fifty points. Anyone who learned the shorthand on cheap parts and carried it up the catalog is wrong by more with every band.
| Markup | Multiplier | Margin | $100 cost sells for |
|---|---|---|---|
| 25% | 1.25 | 20.0% | $125.00 |
| 33.3% | 1.333 | 25.0% | $133.33 |
| 40% | 1.40 | 28.6% | $140.00 |
| 50% | 1.50 | 33.3% | $150.00 |
| 66.7% | 1.667 | 40.0% | $166.67 |
| 100% | 2.00 | 50.0% | $200.00 |
| 150% | 2.50 | 60.0% | $250.00 |
| 233% | 3.33 | 70.0% | $333.33 |
Which number should a shop set targets in?
Margin, then convert. It is what the profit and loss statement reports and what a lender reads, and it is the one figure that compares honestly against a shop twice your size. Margin answers the question that matters: of the money coming in, how much stays?
Markup is the working end. A parts matrix is a list of markups, because a pricing table needs a multiplier it can apply to a cost. So the sequence runs one way: decide the margin you need, convert it to the markup that produces it, then build the table.
Where does this error show up in a shop?
At the parts counter. A supplier quotes a discount off list, a service writer converts it to a markup in their head, and the margin reported afterward was never there.
Matrix reviews are where it hides longest. A shop with a target of 45% parts margin that enters 45% into every band of its matrix is running a 31% margin. That is fourteen points on every part, and nothing on any single invoice looks wrong enough to investigate.
Labor carries it too, and the cost of an hour is bigger than the wage on the pay stub. The Bureau of Labor Statistics puts the "median annual wage for automotive service technicians and mechanics" at $49,670 in May 2024, which is $23.88 across a 2,080-hour year. Benefits ride on top of that wage. BLS reports that for private industry workers in March 2026, "benefit costs averaged $14.01 per hour worked and accounted for the remaining 30.1 percent" of what employers paid, and applying that same share to $23.88 loads the hour to about $34.
Sell that hour at $185 and you keep $151, which reads as an 81.6% margin and a 444% markup. A shop quoting the second figure to a customer or a competitor sounds like it is gouging while describing an ordinary number badly. The tax guide keeps that side of a shop separate, since "businesses that sell services rather than products can figure gross profit directly from net receipts".
What does the error look like across a ticket?
Take a ticket carrying $800 of parts at cost. A shop that means 45% margin and enters 45% markup sells those parts for $1,160 and keeps $360. Priced at a real 45% margin the same parts sell for $1,454.55 and keep $654.55. That is $294.55 of gross profit gone on one ticket, and nothing on the invoice looks wrong enough for anybody to check.
Multiply that out at your own parts volume. The error never announces itself, and it survives every review that reports the same wrong number the pricing was built on.
How do you check a price both ways?
Put the cost and the price into the top of the calculator and read both percentages at once. The arithmetic block shows the division that produced each one, so it can be checked on paper in about ten seconds.
Then use the conversion fields underneath. Typing the markup you apply today gives back the margin it leaves. Going the other way, a margin target comes back as the markup that reaches it.
Definitions and shop context sit in the difference between markup and margin entry, with more under gross profit and parts margin. The pricing workflow these numbers feed is in how an estimate gets priced, and the rest of the calculators are on the tools hub.
Questions shops ask
- What is the difference between markup and margin?
- Both measure the same gross profit dollars against a different base. Markup divides gross profit by your cost. Margin divides it by the selling price. Since the selling price is the larger number, margin is always the smaller percentage on the same transaction.
- Is a 40% markup the same as a 40% margin?
- No. A 40% markup leaves a 28.6% margin, and hitting a 40% margin takes a 66.7% markup. On a $100 part that is a $140 price versus a $166.67 price, so treating the two as interchangeable costs $26.67 of gross profit on one part.
- What is the formula for each one?
- Margin equals price minus cost, divided by price. Markup equals price minus cost, divided by cost. To convert without a price in front of you, margin equals markup divided by one plus markup, and markup equals margin divided by one minus margin.
- Which one should a shop use for its targets?
- Set targets in margin and apply them in markup. Margin is what your financial statement reports and what compares across shops, while markup is the multiplier a pricing table needs. Every parts matrix band is a markup that has to be converted before anybody talks about profitability.
- Can margin ever be above 100%?
- No. Margin is a share of the selling price, so it approaches 100% and never reaches it, because reaching it would mean the part cost nothing. Markup has no ceiling at all. A part bought at $2 and sold at $20 carries a 900% markup and a 90% margin.
- Why does this error cost so much?
- Because it compounds across every line of every ticket. A shop aiming for a 45% parts margin that sets a 45% markup instead lands at 31% and never sees the difference on a single invoice. Over a year of parts sales it is a large number, and nothing on the ticket points at it.