Markup vs Margin Calculator
Convert between markup and margin percentages. Understand the difference for pricing your South African business products.
Markup is the percentage added to cost to get the selling price. Formula: (Profit / Cost) x 100.
Margin is the percentage of the selling price that is profit. Formula: (Profit / Selling Price) x 100.
A 50% markup equals a 33.3% margin. Markup is always higher than margin for the same product.
In South Africa, remember to factor in 15% VAT when setting your retail prices. VAT-inclusive pricing is required for consumer-facing businesses.
The key difference between markup and margin, and how to use each for pricing
What is the difference between markup and margin?
Markup is the percentage added to your cost price to get the selling price. Margin is the percentage of the selling price that is profit. They use different base numbers. If you buy a product for R100 and sell it for R150: the markup is 50% (R50 added to R100 cost), but the margin is only 33.3% (R50 profit out of R150 selling price).
How do I calculate markup?
Markup = (Selling Price - Cost Price) / Cost Price x 100. If your product costs R200 and you sell it for R350, the markup is (R350 - R200) / R200 x 100 = 75%. To set a selling price with a target markup, multiply the cost by (1 + markup%). A R200 item with 75% markup: R200 x 1.75 = R350.
How do I calculate margin?
Margin = (Selling Price - Cost Price) / Selling Price x 100. Using the same example: if your product costs R200 and you sell it for R350, the margin is (R350 - R200) / R350 x 100 = 42.9%. Margin is always lower than markup for the same transaction because it uses the larger selling price as the base.
Which should I use — markup or margin?
Use markup when setting prices from your cost base — it tells you how much to add. Use margin when analysing profitability — it shows what percentage of revenue is profit. Retailers in South Africa typically think in markup (keystone markup is 100%, meaning you double the cost). Accountants and investors prefer margin because it relates directly to revenue.
What is a typical markup in South African retail?
Grocery retail typically uses 20-40% markup. Clothing retail uses 100-200% markup (keystone to triple). Electronics use 15-30% markup. Restaurants mark up food by 200-400%. Furniture uses 50-100% markup. Higher markups are needed for products with slow turnover, high storage costs, or significant spoilage risk.
How does VAT affect markup and margin calculations?
Always calculate markup and margin on VAT-exclusive amounts if you are VAT-registered. VAT is a pass-through — it does not affect your profit. A product costing R100 (excl. VAT) sold for R200 (excl. VAT) has a 100% markup. The VAT-inclusive prices would be R115 and R230, but the markup is still 100%. Only use inclusive amounts if you are not VAT-registered.
How do I convert between markup and margin?
Margin to markup: Markup % = Margin % / (1 - Margin %). A 40% margin equals a 66.7% markup: 0.40 / (1 - 0.40) = 0.667. Markup to margin: Margin % = Markup % / (1 + Markup %). A 50% markup equals a 33.3% margin: 0.50 / (1 + 0.50) = 0.333. Getting these mixed up is a common pricing mistake.
SARS-Aligned: Based on 2025 SARS rates and thresholds. For personal advice, speak to a qualified tax practitioner.
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Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms