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Markup to Gross Margin Conversion Table

Markup and margin are not the same number, and confusing them is one of the oldest ways a shop under-prices work. A 25 percent markup on cost gives only a 20 percent gross margin. This table lets you convert in either direction at a glance and shows the multiplier to apply to cost.

Download:
Starting pointBasisGross margin (on price)Markup (on cost)Price multiplier on costPrice for 100 of cost
Gross margin 5%
Margin
5.0%
5.3%
1.053
105.26
Gross margin 10%
Margin
10.0%
11.1%
1.111
111.11
Gross margin 15%
Margin
15.0%
17.6%
1.176
117.65
Gross margin 20%
Margin
20.0%
25.0%
1.250
125.00
Gross margin 25%
Margin
25.0%
33.3%
1.333
133.33
Gross margin 30%
Margin
30.0%
42.9%
1.429
142.86
Gross margin 35%
Margin
35.0%
53.8%
1.538
153.85
Gross margin 40%
Margin
40.0%
66.7%
1.667
166.67
Gross margin 45%
Margin
45.0%
81.8%
1.818
181.82
Gross margin 50%
Margin
50.0%
100.0%
2.000
200.00
Markup 10%
Markup
9.1%
10.0%
1.100
110.00
Markup 15%
Markup
13.0%
15.0%
1.150
115.00
Markup 20%
Markup
16.7%
20.0%
1.200
120.00
Markup 25%
Markup
20.0%
25.0%
1.250
125.00
Markup 30%
Markup
23.1%
30.0%
1.300
130.00
Markup 40%
Markup
28.6%
40.0%
1.400
140.00
Markup 50%
Markup
33.3%
50.0%
1.500
150.00
Markup 60%
Markup
37.5%
60.0%
1.600
160.00
Markup 75%
Markup
42.9%
75.0%
1.750
175.00
Markup 100%
Markup
50.0%
100.0%
2.000
200.00

Formulas: markup = margin / (1 - margin); margin = markup / (1 + markup); price multiplier = 1 / (1 - margin) = 1 + markup. Values are rounded to one decimal for percentages. Margin here is gross margin on selling price, based on whatever cost you define (material only, standard cost or fully loaded cost), so state the cost base on every quote.

Check your ERP price rules

Optional: we can review whether your ERP applies markup or margin and where realized margin diverges from quoted.

Optional. The tool and every export work without this. No spam.

How to use it

Search for the margin you want and read across to the markup and multiplier that produces it. Or search for the markup you currently apply and read the margin it really delivers. The last column shows the selling price for 100 dollars of cost, which makes mental checks easy: at a 30 percent gross margin, a part that costs 100 dollars to make must sell for about 142.86.

The formulas

Gross margin is profit divided by selling price. Markup is profit divided by cost. If cost is C and price is P, margin = (P - C) / P and markup = (P - C) / C. Solving gives markup = margin / (1 - margin) and margin = markup / (1 + markup). The price multiplier on cost is P / C, which equals 1 + markup and also 1 / (1 - margin). The two percentages are equal only at zero, and the gap widens as the numbers grow.

Why the gap matters in quoting

A buyer may demand a 20 percent margin while your estimating sheet adds a 20 percent markup. The estimate is then 4 points short, which on a million dollars of revenue is tens of thousands in lost profit. Fix it by choosing one language in the company: quote policy in margin, estimating factors in multipliers, and ERP price rules documented with the basis they use. Many ERP price formulas apply a markup percent to cost, so confirm which one your system uses.

Common mistakes

Stacking markups is a frequent trap: a 15 percent markup for overhead and another 20 percent for profit multiplies to 1.38, not 1.35. Mixing cost bases is another; a margin on material cost alone is far higher than a margin on fully loaded cost. Quote margin against the same cost definition you report in the income statement, and keep that definition written down next to the price list.

Frequently Asked Questions

Is a 50 percent markup the same as a 50 percent margin?

No. A 50 percent markup on a 100 dollar cost gives a 150 dollar price and a 33.3 percent gross margin. A 50 percent gross margin needs a 100 percent markup, meaning the price is double the cost.

Which should a manufacturer quote with, markup or margin?

Margin is easier to compare with financial statements and with other businesses, while markup is easier for estimators to apply on a spreadsheet. Many shops set policy in margin and give estimators the equivalent multiplier so nobody converts by hand.

How do I get the multiplier for a target margin?

Divide 1 by (1 minus the margin as a decimal). For a 30 percent margin the multiplier is 1 / 0.70 = 1.4286. Multiply cost by that number to get a price that delivers the target margin on the same cost base.

Does gross margin include overhead?

It depends on the cost you use. Gross margin in the income statement includes direct material, direct labor and manufacturing overhead in cost of goods sold. If your estimate uses only material and labor, the margin you see is higher than the reported gross margin.

Netray can check how your ERP's price lists and quote rules apply markup or margin, and report realized margin by item, customer and job.

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