A supplier tells you they work on 30%. A competitor says they add 30%. Those are not the same thing, and the gap between them is your profit.
Margin and markup use the same two numbers, cost and selling price. The difference is only what you divide by. That sounds trivial. It is not.
The two formulas
Take something that costs you ₹700 and sells for ₹1,000. The profit is ₹300 either way.
| Measure | Divide profit by | Result |
|---|---|---|
| Profit margin | Selling price (₹1,000) | 30% |
| Markup | Cost (₹700) | 42.86% |
Same item, same profit, two very different percentages. Margin is always the smaller number, because the selling price is always larger than the cost.
Where it goes wrong
You decide you need a 30% margin. You apply a 30% markup to your costs, because that feels like the same thing. It is not.
A 30% markup on ₹700 gives ₹910. The margin on that is 23%, not 30%. You have quietly given away a quarter of the profit you thought you were making, on every single job, and nothing in your invoicing will tell you.
Converting between them
If you know the margin you need, this is the markup that delivers it:
| Margin you want | Markup to apply |
|---|---|
| 20% | 25% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
Note the last row. Doubling your cost gives a 50% margin, not 100%. Anyone who says they “work on 100%” is describing markup.
Which should you actually use?
Use markup to set prices, because you start from cost and work forwards. Use margin to judge the business, because it tells you what share of your revenue you keep.
The mistake is not using one or the other. It is quoting a number without saying which you mean, and then comparing it to someone else’s number that meant the other thing.
A note on GST
Work out margin and markup on figures that exclude tax. GST is collected on behalf of the government, not earned by you. Including it in the selling price inflates your apparent margin and tells you nothing useful.
If you only have the tax-inclusive figure, strip the tax out first, then calculate.
Services have costs too
It is easy to assume a service is all margin because you did not buy anything. But your time has a cost, and so do the subcontractors, software, travel and the hours you spent quoting jobs you did not win.
A rough hourly cost is better than treating revenue as profit, which is how a business can look busy and profitable while the bank balance never moves.
The takeaway
Decide the margin your business needs, convert it to the markup that produces it, and check the result on real numbers rather than assuming. Do that once for each thing you sell and the pricing looks after itself.
The profit margin calculator shows margin and markup side by side, and the markup calculator works forwards from cost. Both are free and instant.