Profit margin vs markup: different numbers, different decisions
Markup is measured against cost; margin is measured against revenue. Confuse them and everything downstream — pricing, ad budgets, 'is this product worth it' — is quietly wrong.
Published 29 July 2026 · Rates last checked 18 August 2026 · Worked examples computed by the live calculation engine
The definitions
markup % = profit ÷ cost × 100
margin % = profit ÷ revenue × 100The two are convertible — a 25% margin is a 33% markup, a 50% margin is a 100% markup — but only when computed on the same profit figure. The trap for marketplace sellers is computing markup on raw product cost while fees, postage and VAT eat the revenue side.
A real example
The £34.99 eBay item from our UK fees guide (cost £14.00, £3.35 postage, business seller):
- “Shop maths” markup on cost
- 150%
- True profit (engine)
- £9.61
- True margin
- 33.0%
- True markup on ex-VAT cost
- 82%
A 150% markup sounds like a monster product. After fees, VAT and postage the true margin is 33.0% — healthy, but less than half of what the markup number implied. On a cheaper item the same gap routinely turns "profitable" negative.
Assumptions
- True profit and margin are ex-VAT figures from the live engine (Home, Furniture & DIY category, verified UK card).
- "Shop maths" markup uses VAT-inclusive prices, as sellers usually quote them — that inconsistency is part of the trap being illustrated.
Frequently asked
- Is a 100% markup the same as a 50% margin?
- Yes — on raw product cost. Doubling your cost price (100% markup) means half the selling price is gross profit (50% margin). But that's before fees, VAT, postage and packaging, which is why marketplace sellers using cost-doubling still lose money on cheap items.
- Which should I use to price?
- Set a target margin on the full, true cost stack — not a markup on product cost alone. Markup ignores every cost that isn't the product, and on marketplaces those other costs are often bigger than the product.
- What margin should an eBay or Shopify seller aim for?
- There's no universal number; it depends on your return rate, ad spend and volume. Munavo defaults to a 10% target as a floor and lets you set your own — the point is to measure against the true margin, not the markup.
- Why does my accountant's margin differ from my calculator's?
- Usually the VAT basis. Accounting margins are ex-VAT by definition; seller spreadsheets often mix VAT-inclusive prices with ex-VAT costs. Munavo computes margins ex-VAT on both sides, matching your accounts.
Every rate used on this page is public: see the Rate Centre for the exact cards and verification dates, and how we keep the numbers honest.
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