Profit Margin vs Markup: The Pricing Difference That Costs Businesses Money
Learn the difference between profit margin and markup, with simple examples for Australian small business pricing.
Profit margin and markup are often confused, but they are not the same. Mixing them up can make a product look more profitable than it really is.
Markup is based on cost
If a product costs $50 and you sell it for $100, the markup is 100% because the profit is equal to the cost.
Margin is based on selling price
Using the same example, the margin is 50% because $50 profit is half of the $100 selling price.
Why this matters
If you are pricing products, running ads or paying shipping and transaction fees, margin gives a clearer view of what you actually keep.