What is profit margin?

Profit margin is profit relative to the selling price — different from markup, which is relative to cost. An item costing 75 sold for 100 has a 25% margin and a 33.3% markup. Confusing the two is one of the commonest pricing mistakes.

Sales and pricing

Profit margin

Profit margin is profit relative to the selling price — different from markup, which is relative to cost.

Explained

An item costing 75 sold for 100 has a 25% margin and a 33.3% markup. Confusing the two is one of the commonest pricing mistakes.

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Related terms

MarkupMarkup is profit relative to cost, used to set a selling price from cost.
Cost of goods soldCost of goods sold is the cost of the items sold in a period, deducted from sales to reach gross profit.

All terms