Margin math

Margin vs markup for service pricing

Margin measures profit as a share of the selling price. Markup measures profit as a share of cost.

QuoteForProfit · Updated 2026-11-06 · US service-provider context

Compare the denominators

Margin versus markup calculator

Use the same cost and selling price to see why the percentages differ. This comparison excludes quote-based fees so the denominators are easy to inspect.

Operating profit$30

Margin: profit ÷ price30.00%

Markup: profit ÷ cost42.86%

Worked example

$70 cost and $100 sale produce $30 profit: 30% margin and about 42.86% markup. A 30% markup would give a $91 sale, only about 23.08% margin.

The denominators differ

With $70 cost and a $100 price, profit is $30. Margin is $30 ÷ $100 = 30%, while markup is $30 ÷ $70 ≈ 42.86%.

Use the correct target formula

For a 30% margin with no percentage fees, divide cost by 0.70. Adding 30% to cost would produce a 30% markup and a smaller margin.

Include quote-based fees

If a processor takes 3% of the sale, a 30% target margin requires $70 ÷ (1 − 0.03 − 0.30) = $104.48. Confirm the fee is actually based on the quoted amount.

When to use this method

Use margin when setting a profit goal as a share of sales. Use markup when describing how much profit is added relative to cost; name the denominator when discussing a percentage.

A mistake to avoid

Adding 30% to a $70 cost gives $91, not the $100 needed for a 30% margin. A percentage label without its denominator can misstate the goal.

What this does not tell you

These are calculation examples using stated assumptions. They are not national service rates, local quotes, tax advice, or a prediction of demand. Confirm your own scope, costs, fee basis, and any local requirements before sending a price.

Source and updates

The formulas and assumptions are explained in our methodology. This guide was prepared on 2026-11-06. If you find an error, send a correction.

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