Margin and markup are not the same thing
Both start from the same profit, the selling price minus the cost. Margin is that profit as a share of the PRICE, so it answers "how much of each sale do I keep?". Markup is the same profit as a share of the COST, so it answers "how much did I add on top of what I paid?". Because cost is the smaller number, markup is always the bigger percentage, and the gap widens as prices rise.
The confusion bites hardest when setting prices. If you want a 40% margin and you add a 40% markup, you'll fall short every time. To hit a target margin, work backwards from the cost instead.
Worked example
With the defaults, something bought for $40.00 and sold for $65.00 makes $25.00 profit, a 38.46% margin and a 62.50% markup, and mixing those two up is one of the most common small business pricing mistakes.
Frequently asked questions
Why are margin and markup different numbers?
They divide the same profit by different things. Margin divides it by the selling price; markup divides it by the cost. Because the cost is always the smaller number, markup always looks bigger than margin on the same sale. Quote one when you mean the other and your prices end up wrong.
What margin should a small business aim for?
There's no universal answer, because typical margins vary wildly by sector. Grocery runs on thin single digits while software can run very fat. The useful move is knowing the normal range for your own sector and where your own numbers sit against it, not chasing someone else's benchmark.
Does this calculator include tax and overheads?
No. This is unit economics: what one sale earns over what that item cost you. Rent, wages, software, tax, and every other overhead still have to come out of the margin, which is why a product can show a healthy margin while the business overall loses money.