The difference between margin and markup

Challenge : 30% margin, what percentage markup is it?

Solution : 42.9%

In my 15 years of trading experience, I very often encounter experienced traders using the words margin and markup interchangeably.

What is margin? It is a term used to show what the profit is on a product after deducting its cost of production.

Example: If a coat costs 100 BGN and its cost price is 70 BGN, there is 30 BGN margin left. 30 BGN/100 BGN = 30% margin.

What is a markup? It is a term used to indicate how much the price is increased by to reach the selling price.

Example: If the cost of the coat is 70 BGN and we sell it for 100 BGN, its markup is 30 BGN. 30 BGN/70 BGN = 42.9% markup.

Why is it important to know the terminology - so that you know what your profit is and not to sell below cost. You should deduct all other costs from the margin to arrive at a % profit. When you start from the right percentage, the probability of selling a product/service below cost is very small.

PS Easy to remember 50% margin is 100% markup.

Homework: How much markup is a 40% margin?

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