Profit Margin vs Markup: Same Gap, Different Denominator

Margin and markup both start from gross profit (revenue − COGS), but they divide by different bases. Confusing them mis-prices products and SaaS plans. This guide keeps the definitions straight and links to the related business worksheets.

Two formulas

Gross margin % = gross profit ÷ revenue. Markup % = gross profit ÷ COGS. A 50% markup is not a 50% margin. Example: $100 cost sold at $150 is 33.3% margin and 50% markup.

Gross, not net

These worksheets exclude operating expenses, interest, and tax. Negative margin simply means entered COGS exceeds revenue—not a full P&L diagnosis.

Price with clear language

Choose the metric your stakeholders use

Finance teams often speak margin; some suppliers speak markup.

Enter revenue and COGS consistently

Same period, same currency, no double-counting shipping unless it belongs in COGS for your model.

Read both outputs

Confirm the worksheet’s margin and markup match the definitions above.

Stress volume next

Open break-even when fixed costs matter more than unit margin alone.

SaaS note

Subscription pricing still needs contribution margin thinking. Pair margin math with CLV and SaaS pricing worksheets when recurring revenue and churn dominate.