If you’re looking for a quick, straightforward way to convert markup into margin, this is it.
We’ve written about the markup formula and the margin formula before, but our previous post was specifically for calculating these numbers when you already had the price and cost of that particular product. But a few readers contacted us with another question. If you only know the markup percentage, is there a formula to convert markup directly into margin?
The answer is yes, and we’ve written out the formulas below.
How to convert markup into margin (or vice versa)
If you’re not familiar with the terms, this is a quick overview:
- Markup is the amount by which the cost of a product is increased in order to obtain the selling price. For example a markup of $90 on a product that costs $110 would give a selling price of $200. Which is an 82% markup (markup divided by product cost)
- Margin is the selling price of a product minus cost of goods. Using the above example, the margin for a product sold for $200 with a cost of $110 would be $90. Which is a 45% margin (margin divided by selling price).
In general we’d recommend that you still know your price and cost as real numbers when examining markup and margin, but if you’re just trying to do quick conversions, these formulas will do the trick:
With the formulas above, all you’ll need to do is express your percentage or markup or margin as a real number. This means that 100% is written as 1.00, 200% is written as 2.00, and so on.
Let’s take the example of a 50% margin and see how to express that value as markup:
A quick table of margin and markup values
As you can see, once you have a number for margin in place, it’s very easy to figure out markup. Since there’s a simple mathematical relationship between the two, you can even keep a cheat sheet with a few values in mind like the one below:
You can use the formulas above or this quick table to quickly convert margin into markup, or express markup as a profit margin. But if you’re not sure what each number means, we have another post that goes into more detail.
inFlow Cloud automatically calculates markup for you
As easy as all that math is, you don’t actually have to crunch those numbers yourself.
If you manage your purchases and sales in inFlow Cloud, then the system will know your unit costs and sale prices. inFlow can automatically calculate your markup for you on a per-product basis. It can also make sure that your markup percentage is fixed. So you’ll always make money, even if it becomes more expensive to buy more stock. If you have multiple pricing schemes that have different markup values (like wholesale vs. retail pricing), you can also import multiple pricing schemes at once.
In short, inFlow Cloud saves you time and takes care of the calculations as your costs change!