He Added 25%. He Thought He Was Making 25%. He Was Making 20%.

Markup and margin are both percentages and they are never equal. Shops that price on one and budget on the other lose money in a way that never appears as a mistake.

Vikram priced everything in his Jaipur shop by adding a percentage to what he paid. Buy at ₹80, add 25%, sell at ₹100. He described this, to his accountant and to himself, as a 25% margin.

It is a 25% markup and a 20% margin. On ₹42 lakh of annual turnover, planned against a 25% margin he was not earning, the difference was a little over ₹2 lakh a year of profit that existed only in his forecasts.

The Difference in One Line

Both are the same rupee amount of profit expressed as a percentage. They differ in what you divide by.

Markup is always the larger number. That is not a quirk; it follows from dividing by the smaller figure, and the gap widens as the percentage rises. At low percentages they are close enough that nobody notices. At high ones they diverge sharply.

A shopkeeper who says "I double it" is describing a 100% markup and a 50% margin, and both statements are true at once, which is exactly why the confusion survives.

Why It Matters More Than It Sounds

If you only ever used one of the two, the mistake would be harmless. The damage comes from pricing in markup and then reasoning in margin, which nearly everyone does without noticing the switch.

Every individual price was fine. The plan built on top of them was five points out, on everything, for six years.

Converting Between Them

Two formulas, worth writing on the inside of a cupboard door.

The second is the one to use at the counter. Decide the margin you need, convert it to the markup that produces it, and price with that.

Margin is the more useful of the two because it is a share of the money that actually comes in, which is what every other number in your business is measured against. Decide your target margin per category, convert once to the markup that delivers it, and never quote yourself the markup figure again.

The Second Error Underneath the First

Vikram’s accountant found a compounding problem. His cost figure was the invoice price, and that is not what the goods cost him.

On perishables his true cost ran about 4% above invoice once wastage was included. Combined with the markup-margin error, his fruit and vegetable line was earning about 11% where he believed it was earning 25%.

Mapis stores cost and selling price against each product and reports margin as a share of the selling price, so the figure on your screen is the one your breakeven, your discounts and your bank all use.

Frequently asked questions

What is the difference between margin and markup?

Both express the same rupee profit as a percentage, but markup divides profit by cost while margin divides profit by selling price. Buy at ₹80 and sell at ₹100 and you have a 25% markup and a 20% margin. Markup is always the larger number, and the gap grows as the percentage rises.

How do I convert markup to margin?

Margin = markup ÷ (100 + markup). A 30% markup is 30 ÷ 130 = 23.1% margin. Going the other way, markup = margin ÷ (100 − margin), so earning a 30% margin requires a 42.9% markup. The second formula is the one to use when pricing, since you decide the margin you need first.

Which should a shop use for pricing, margin or markup?

Decide in margin, price in markup. Margin is a share of the money that actually comes in, which is what breakeven, discount decisions, category benchmarks and loan projections all use. Set a target margin per category, convert once to the markup that delivers it, and stop quoting yourself the markup.

Why is my actual margin lower than what I calculated?

Usually because the cost figure used was the invoice price rather than the true landed cost. Freight, non-recoverable GST, and expected wastage or breakage all belong in cost. On perishables the true cost commonly runs several percent above invoice, which combined with a markup-for-margin error can halve the profit you believed you were earning.