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How to Convert Margin Into Markup or Markup Into Margin

Posted by ThomasLast Updated June 15th, 2023
— 4 minutes reading

If you’re looking for a quick, straightforward way to convert markup into margin, this is it!

How to turn Markup into Margin | inFlow Inventory

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.

Markup = Margin / (1 - Margin) and Margin = Markup / (1 + Markup)

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 in which you increase a product’s cost 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 the 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, you’ll need to express your numbers as a percentage, whether markup or margin. This means you write 100% as 1.00, 200% as 2.00, and so on.

Let’s take the example of a 50% margin and see how to express that value as markup:

Given Markup = Margin / (1 - Margin), then a Margin of 0.50 (50%) equals a markup of 1.00 (100%)

Margin vs. markup chart

As you can see, once you have a number for margin in place, it’s straightforward 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:

A table showing Markup values and their margin equivalents. Markup of 100% is a margin of 50%, a markup of 200% is a margin of 66.6%, etc.

You can use the formulas above or this quick margin vs. markup chart to quickly convert margin into markup or express markup as a profit margin. But if you’re unsure what each number means, we have another post that goes into more detail.

Why margin vs. markup is important

If you’re selling products, the ultimate goal is to turn a profit. Both margin and markup are pricing strategies to ensure you do just that. The decision on which of these two you use depends on your business needs and goals. 

Generally speaking, you would use margin in situations where the cost of production is consistent and stable. Consider using markup instead of margin if you have various products and their costs vary significantly. 

No matter which one you choose, there are some downsides to each. Since the cost of a product is often a variable number and can change without warning, if you use margin, you might be pricing your products too low. On the flip side, if you use markup, you may be pricing too high as you constantly adjust for the changing costs. This will prevent you from staying competitive and ultimately result in customers taking their business elsewhere.    

inFlow calculates markup automatically

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, the system will know your unit costs and sale prices. From there, the software 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 with different markup values (like wholesale vs. retail pricing), you can also import multiple pricing schemes simultaneously.

In short, inFlow saves you time and handles the calculations as your costs change! It makes selling your products online a breeze with over 95 integrations, including Amazon, Shopify, and Squarespace. If you’re using barcodes or thinking of implementing them, inFlow Cloud can help with that too. Read our Ultimate Barcoding Guide to learn everything about barcodes, including how to set up a barcoding system.

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