Margin vs Markup: What Bakers Need to Know
Educational. Clears up the most common pricing mistake and shows why the difference changes the price. Ties directly to the calculator's margin setting.
The short answer
Margin is the share of the selling price you keep. Markup is a percentage added to your cost. They are not interchangeable, and using one while thinking of the other is a reliable way to undercharge: a 60 percent markup on £4 gives £6.40, while a 60 percent margin gives £10.
Step by step
- Know which you are using. Margin divides by (1 minus the rate). Markup multiplies by (1 plus the rate). The same headline number gives very different prices.
- Prefer margin for pricing decisions. It maps directly onto what you keep from each sale, which is the question you are actually asking.
- Convert when a supplier quotes markup. A 50 percent markup is a 33 percent margin. A 100 percent markup is a 50 percent margin.
- Check the actual margin after rounding. Rounding a price up nudges the real margin above target; rounding down quietly puts it below.
The same cost at the same percentage
A product costing £4.00, at a headline figure of 60 percent.
| Line | Amount |
|---|---|
| 60% markup | £6.40 |
| Actual margin achieved | 37.5% |
| 60% margin | £10.00 |
| Actual markup applied | 150% |
| Difference on one item | £3.60 |
On a hundred items that is £360 of margin, decided entirely by which word you used. Bakers who feel busy but broke are often applying markup while budgeting for margin.
Why it matters
This is the single most common pricing error in small food businesses, and it is invisible: the price looks deliberate either way. Showing the actual margin a price achieves is what makes the mistake obvious.