Margin vs Markup - Key Formulas
Gross Profit = Selling Price − Cost of Goods (COGS)
Gross Margin = (Gross Profit ÷ Selling Price) × 100
Markup = (Gross Profit ÷ Cost) × 100
Net Profit = Gross Profit − Overhead − Tax
Net Margin = (Net Profit ÷ Selling Price) × 100
From target margin to selling price:
Selling Price = Cost ÷ (1 − Margin%/100)
Example: Cost ₹500, target 40% margin
→ Price = 500 ÷ 0.60 = ₹833.33
Margin ↔ Markup conversion:
Markup = Margin ÷ (1 − Margin/100)
Margin = Markup ÷ (1 + Markup/100)
Industry Gross Margin Benchmarks (India)
FMCG / Consumer goods: 40–60% · Software / IT services: 60–80% · Retail / Trading: 20–35% · Manufacturing: 25–45% · Restaurants: 60–70% (on food cost; net margin 10–15%) · E-commerce: 25–40%
FAQs
What is the difference between profit margin and markup?
Margin is calculated on the selling price; markup is calculated on the cost. A 50% markup means you added 50% of cost to get the price - but the margin is only 33% (since profit/price = 50/150). This distinction is critical for pricing decisions. If a retailer targets a 40% margin, the markup needs to be 66.7%: Price = Cost ÷ (1-0.40).
