| Aspect | Gross Margin | Markup |
|---|---|---|
| Denominator | Revenue (Sale Price) | Cost of Goods Sold (COGS) |
| Formula | (Price - Cost) / Price | (Price - Cost) / Cost |
| Always larger? | Margin is always smaller than markup percentage | Markup is always larger than margin percentage |
| Example for $100 cost, $150 price | 33.3% Gross Margin | 50% Markup |
Margin vs Markup math rule
Gross margin is profit divided by revenue. Markup is profit divided by cost. Confusing a 50% markup with a 50% margin will result in underpricing your products and destroying profitability.