Markup vs gross margin
Shop owners
Markup is profit as a share of cost; gross margin is profit as a share of the selling price. The same dollar profit always gives a smaller margin percentage than markup percentage.
Formulas
Markup % = (price − cost) ÷ cost. Margin % = (price − cost) ÷ price. Price for a target margin = cost ÷ (1 − margin).
Worked example
A $100 part with a 25% markup sells for $125 — a 20% margin. To earn a 25% margin, price it at $100 ÷ 0.75 ≈ $133.33.
Common questions
- Which should I track?
- Margin ties directly to how much of each sale is left to cover overhead, so many shops report margin and price with markup.
Sources & review status
Written from general engineering principles. Modern source citations are pending editorial review.
Original Repairius explanation. Not yet reviewed by a qualified technician; not a substitute for the maker's service information.