vault backup: 2025-11-11 17:19:52

markup-vs-margin.md

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+---
+id:
+aliases: []
+tags: []
+title: Markup vs. Margin
+---
+# Markup vs. Margin
+
+$$
+\text{Profit} = \text{Sell Price} - \text{Cost}, \quad
+\text{Markup} = \frac{\text{Profit}}{\text{Cost}}, \quad
+\text{Margin} = \frac{\text{Profit}}{\text{Sell Price}}
+$$
+
+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're still probably talking about margin.