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title: Markup vs. Margin
---
# Markup vs. Margin

**Markup** and **margin** are both terms to describe the percent profit of a sold good or service.
**Markup** describes an item's profit relative to its cost to the merchant.
**Margin** describes an item's profit relative to its cost to the customer.

$$
\text{Profit} = \text{Sell Price} - \text{Cost}, \quad
\text{Markup} = \frac{\text{Profit}}{\text{Cost}}, \quad
\text{Margin} = \frac{\text{Profit}}{\text{Sell Price}}
$$

Suppose a product that
* costs $80 to produce
* is sold for $100

$$
\text{Profit} = 100 - 80 = 20, \quad
\text{Markup} = \frac{20}{80} = 25\%, \quad
\text{Margin} = \frac{20}{100} = 20\%
$$

Because of \*waves hands\* finance reasons,
contractors (and sellers of products and services in general)
almost exclusively talk about profit in terms of margin.
Even if someone says "15% _markup_"
they may still be talking about margin.
