Glossary

Margin

Profit expressed as a share of the selling price.

Margin and markup use the same two numbers and divide them differently: margin is profit over price, markup is profit over cost. A 40% markup on a $60 cost gives an $84 price and a 28.6% margin, not the 40% intended. Pricing for a target margin means dividing cost by one minus that margin rather than multiplying cost by one plus it, and the gap between the two methods widens as the target rises. It is the most expensive arithmetic slip in small-business pricing because it repeats on every unit sold.

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