PORcalc
Margin vs Markup vs POR: What's the Difference?
These three terms all describe profit, but they measure it against different numbers — and mixing them up is one of the most common pricing mistakes in retail. Here's how each one actually works.
The core difference
Markup is profit expressed as a percentage of cost. Margin (and POR, Profit on Return) are profit expressed as a percentage of selling price. Because selling price is always a bigger number than cost, margin and POR percentages are always lower than the markup percentage on the same sale.
A worked example
Say a product costs £10 and sells for £15. The profit is £5 either way — but the percentage you quote depends entirely on which number you divide it by:
| Measure | Formula | Result |
|---|---|---|
| Markup | £5 profit ÷ £10 cost | 50% |
| Margin / POR | £5 profit ÷ £15 selling price | 33.3% |
Same sale, same £5 profit — but a 50% markup and a 33.3% margin. Neither number is wrong; they're just answering different questions.
Why this trips people up
The mistake usually happens when someone aims for a "50% margin" but actually applies a 50% markup instead (or vice versa). Doing that on a £10 cost item gives a £15 selling price either way you calculate it forwards — but if you're working backwards from a target margin, using the markup formula by mistake will under-price the product and quietly erode profit across your whole range.
Converting between the two
- Markup → Margin: Margin = Markup ÷ (1 + Markup)
- Margin → Markup: Markup = Margin ÷ (1 − Margin)
Which one should you use?
For retail and convenience store pricing, POR (margin-based) is generally more useful day-to-day, because it directly answers "how much of what the customer pays ends up as profit?" — which is the number that matters when comparing products, setting price points, or hitting a category profitability target. Markup is more common in cost-accounting contexts where you're working forward from a known cost.
Whichever measure you use, the safest way to avoid the mix-up is to let a calculator handle the conversion rather than doing the arithmetic by hand.
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