Markup vs. margin: what's the difference?

Understanding the difference between markup and margin and how each affects your product pricing.

Written By Gemma DeMasi

Last updated About 1 month ago

Markup and margin are both ways to add profit to the cost of a product, but they are calculated differently. Using the wrong one can significantly affect your pricing without you realizing it.

Markup

Markup is the percentage added on top of your cost to arrive at the client price.

Formula: Client Price = Cost × (1 + Markup %)

Example: A product costs you $1,000. With a 30% markup:

  • $1,000 × 1.30 = $1,300 client price

  • Your profit is $300

  • That $300 represents 30% of your cost

Margin

Margin is the percentage of the client price that is profit. It is calculated based on the selling price, not the cost.

Formula: Client Price = Cost ÷ (1 - Margin %)

Example: A product costs you $1,000. With a 30% margin:

  • $1,000 ÷ 0.70 = $1,428.57 client price

  • Your profit is $428.57

  • That $428.57 represents 30% of the client price

Side by side comparison

Scenario

Cost

Rate

Client Price

Profit

30% Markup

$1,000

30% on cost

$1,300.00

$300.00

30% Margin

$1,000

30% of sell price

$1,428.57

$428.57

Which one should you use

Most interior designers use markup because it is simpler to apply and explain. However, margin gives you a clearer picture of what percentage of your revenue is profit.

The important thing is to pick one method and use it consistently. Mixing markup and margin across different projects or products makes it difficult to compare profitability accurately.

In the system, you can set markup or margin per product, per estimate, or as a default in your vendor settings. The summary bar at the bottom of every estimate and invoice shows both your markup and your margin so you always have a clear view of your profitability.