Cost & Selling Price → Profit · Margin % · Markup %
Profit margin expresses profit as a percentage of the selling price. It tells you how much of each dollar of revenue is actual profit. A 40% margin means you keep $0.40 of profit for every $1.00 of sales. This is the metric most commonly used in financial reporting and investor presentations because it directly reflects profitability relative to revenue.
Markup expresses profit as a percentage of the cost. It tells you how much you've added on top of your cost. A 66.7% markup means you charged $0.67 on top of every $1.00 of cost. Markup is primarily used in pricing strategy and retail settings. Confusing margin and markup is one of the most common pricing mistakes businesses make — always know which one you're using.
Profit margins vary dramatically by industry. Software/SaaS companies often enjoy 60–80% gross margins due to low marginal costs. Restaurants typically operate on thin 3–9% margins due to food costs and labor. Retail stores average 2–5%, while consulting and professional services can achieve 20–30%. Always benchmark against your specific industry rather than using a universal "good" number.