What to do next
Show the working, step by step
Where I used this
I built Asiatic Digital’s agency practice from the ground up to about $1M in monthly revenue within seven months.
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Margin and markup are not the same
Margin is profit as a share of the selling price. Markup is profit as a share of cost. The same product always has a higher markup than margin, which is why confusing them leads to under-pricing. Retailers and distributors often quote one while suppliers think in the other, so agree which one you mean.
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 200% | 66.7% |
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Questions
What is the difference between margin and markup?
Margin divides profit by the selling price; markup divides profit by cost. A product costing 40 and selling for 60 has a 33% margin and a 50% markup.
How do I price for a target margin?
Divide cost by one minus the target margin. For a 45% margin on a cost of 40, the price is 40 ÷ 0.55 = 72.73.
Which costs should I include?
For unit margin, include every cost that rises with each sale: product, packaging, delivery and payment fees.