25% Markup to Margin: a 25% markup is a 20% margin
A 25% markup on cost is a 20% gross margin on the selling price. The two numbers describe the same sale from different ends: markup looks up from what you paid, margin looks down from what you charged.
Check any cost at 25% markup
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The formula
25 ÷ 125 × 100 = 20%
The reason 25% turns into 20% is the denominator. Profit stays the same, $10.50 on a $42.00 item, but markup measures it against the $42.00 you paid while margin measures it against the $52.50 the customer paid. A bigger denominator makes a smaller percentage.
Price table at 25% markup
Every row adds 25% to the cost. The margin column is the same on every line, 20%, because margin depends only on the percentage, not on the amount.
| Cost | Price at 25% markup | Gross profit | Margin |
|---|---|---|---|
| $5.00 | $6.25 | $1.25 | 20% |
| $10.00 | $12.50 | $2.50 | 20% |
| $25.00 | $31.25 | $6.25 | 20% |
| $50.00 | $62.50 | $12.50 | 20% |
| $100.00 | $125.00 | $25.00 | 20% |
| $250.00 | $312.50 | $62.50 | 20% |
| $500.00 | $625.00 | $125.00 | 20% |
| $1,000.00 | $1,250.00 | $250.00 | 20% |
| $2,500.00 | $3,125.00 | $625.00 | 20% |
| $10,000.00 | $12,500.00 | $2,500.00 | 20% |
Markups near 25%
From 15% to 35% markup the margin moves from 13% to 25.9%: each two-point step in markup is worth less than two points of margin at this level, and the gap widens as the markup grows. The multiplier column is what you type into a spreadsheet to price a cost list.
Worked example
Suppose the landed cost is $42.00. Marking it up by 25% gives a price of $52.50 and a gross profit of $10.50. Divide the profit by the price and you get 20%: that is the margin a bank or a marketplace dashboard will show for the same sale.
Why the two percentages differ
Spreadsheets make this worse, not better. A column labelled "margin" that actually divides profit by cost will report 25% on every line, while the real margin sits at 20%. Multiply that by a year of sales and the profit forecast is out by the same 5 points.
When to use markup, when to use margin
Use 25% markup when you price from cost upward: a tradesperson adding a handling charge to parts, a reseller applying a standard uplift to a supplier price list, or a café pricing a $42.00 ingredient cost to a $52.50 menu item. Switch to margin, 20%, when you report to anyone who reads a profit and loss statement.
If what you actually want is a 25% margin, the markup has to be 33.3%, not 25%. On a $42.00 cost that means a price of $56.00 instead of $52.50.
See the mirror page: what markup gives a 25% margin.