You price every bag at 40% over cost. You plan the month around a 40% profit. Then the numbers come in and there is ₱22,857 less than you expected.
No one stole from the drawer. No supplier overcharged you. The money was never there, because a 40% markup and a 40% margin are two different things.
This lesson starts Module 2 of PetshopMBA, Pricing That Pays. Before you can set better prices, you need to measure profit the same way every time.
What Is the Difference Between Markup and Margin?
Both describe the same peso profit. They just divide it by different numbers.
Markup
How much you add on top of what the product cost you. Useful when you are setting a price from a supplier invoice.
₱200 profit on a ₱500 cost = 40% markup
Margin
How much of every peso a customer pays stays with you as gross profit. This is the number your monthly results run on.
₱200 profit on a ₱700 price = 28.6% margin
Your sales are counted in selling prices, so your profit plan has to be in margin. If you price with markup and plan with margin, your plan will always come out higher than reality.
The Two Formulas Side by Side
Same top line, different bottom line.
Read them together. Markup answers "how much did I add?" Margin answers "how much of each sale do I keep?" When you talk about your month, your gross profit or your targets, you want the second question.
See It in Pesos: Markup to Margin
The gap grows as your markup grows.
Common markups and the margin they really give
| If your markup is | Your margin is |
|---|---|
| 20% | 16.7% |
| 25% | 20.0% |
| 33.3% | 25.0% |
| 40% | 28.6% |
| 50% | 33.3% |
| 66.7% | 40.0% |
| 100% | 50.0% |
Margin = Markup ÷ (1 + Markup). Rounded to one decimal.
The Plan
The Reality
Same shop, same sales, same prices. The only difference is which number the owner divided by. The plan was ₱22,857 too optimistic, and that is money the owner may already have counted on for rent, salaries or the next stock order.
How to Switch Between Markup and Margin
Two short conversions you can do on a phone calculator.
Markup to margin: 0.40 ÷ (1 + 0.40) = 0.286, so 28.6%
Margin to markup: 0.25 ÷ (1 − 0.25) = 0.333, so 33.3%
So a 25% margin needs a markup of about 33.3%, not 25%
Where the Mix-Up Hides
Three habits that make the gap bigger without anyone noticing.
Pricing with markup, planning with margin
The classic. Prices go up 40% on cost, then the month is budgeted as if 40% of sales is profit.
Using the supplier price instead of landed cost
Leave out delivery and fees and both your markup and your margin look better than they are.
Mixing the two words when you compare
"Thirty percent" means very different prices depending on whether someone means markup or margin. Always ask which one.
Check Your Top Sellers This Week
Twenty minutes with your price list is enough.
Pull your top 10 items
Use your sales records or simply the items you reorder most often.
Write the landed cost
Supplier price plus your share of delivery and fees per unit.
Work out each margin
(Shelf price − Landed cost) ÷ Shelf price. Write it as a percentage.
Mark the surprises
Circle any item whose margin is much lower than you assumed. Lesson 06 shows how to reprice it.
Copy this: margin check for your top sellers
| Item | Landed cost | Shelf price | Peso profit | Margin |
|---|---|---|---|---|
| ____ | ₱ ____ | ₱ ____ | ₱ ____ | ____ % |
| ____ | ₱ ____ | ₱ ____ | ₱ ____ | ____ % |
| ____ | ₱ ____ | ₱ ____ | ₱ ____ | ____ % |
Margin = Peso profit ÷ Shelf price × 100.
Your Margin Starts With What You Pay
Pricing can only protect a margin that buying has already made possible.
Once you measure in margin, you see quickly that your landed cost decides most of the story. Scattered orders, several delivery fees and prices that change from supplier to supplier make that cost hard to pin down.
How Tail Stocks helps
Tail Stocks is a B2B wholesale marketplace for Philippine pet businesses. You buy from multiple suppliers in one place at their own wholesale prices, with no markup, and check out with one order, one delivery and one payment.
With your buying in one place, your landed cost is easier to see, and so is your real margin.
Key Takeaways
- Markup = (Price − Cost) ÷ Cost. Margin = (Price − Cost) ÷ Price.
- The peso profit is the same. Margin is always the smaller percentage.
- A 40% markup is only a 28.6% margin.
- Plan your month, your targets and your gross profit in margin.
- To hit a margin, your markup has to be higher than that margin.
Markup is a pricing shortcut. Margin is the truth about what each sale leaves you. Use both, but never mix them up when you plan.
Next lesson: how to set a price from your cost so you land on the exact margin you want.
Start every price from a clear cost
Buy from multiple pet suppliers in one place, at their own wholesale prices.
Create your Tail Stocks account
You price every bag at 40% over cost. You plan the month around a 40% profit. Then the numbers come in and there is ₱22,857 less than you expected.
No one stole from the drawer. No supplier overcharged you. The money was never there, because a 40% markup and a 40% margin are two different things.
This lesson starts Module 2 of PetshopMBA, Pricing That Pays. Before you can set better prices, you need to measure profit the same way every time.
What Is the Difference Between Markup and Margin?
Both describe the same peso profit. They just divide it by different numbers.
Markup
How much you add on top of what the product cost you. Useful when you are setting a price from a supplier invoice.
₱200 profit on a ₱500 cost = 40% markup
Margin
How much of every peso a customer pays stays with you as gross profit. This is the number your monthly results run on.
₱200 profit on a ₱700 price = 28.6% margin
Your sales are counted in selling prices, so your profit plan has to be in margin. If you price with markup and plan with margin, your plan will always come out higher than reality.
The Two Formulas Side by Side
Same top line, different bottom line.
Read them together. Markup answers "how much did I add?" Margin answers "how much of each sale do I keep?" When you talk about your month, your gross profit or your targets, you want the second question.
See It in Pesos: Markup to Margin
The gap grows as your markup grows.
Common markups and the margin they really give
| If your markup is | Your margin is |
|---|---|
| 20% | 16.7% |
| 25% | 20.0% |
| 33.3% | 25.0% |
| 40% | 28.6% |
| 50% | 33.3% |
| 66.7% | 40.0% |
| 100% | 50.0% |
Margin = Markup ÷ (1 + Markup). Rounded to one decimal.
The Plan
The Reality
Same shop, same sales, same prices. The only difference is which number the owner divided by. The plan was ₱22,857 too optimistic, and that is money the owner may already have counted on for rent, salaries or the next stock order.
How to Switch Between Markup and Margin
Two short conversions you can do on a phone calculator.
Markup to margin: 0.40 ÷ (1 + 0.40) = 0.286, so 28.6%
Margin to markup: 0.25 ÷ (1 − 0.25) = 0.333, so 33.3%
So a 25% margin needs a markup of about 33.3%, not 25%
Where the Mix-Up Hides
Three habits that make the gap bigger without anyone noticing.
Pricing with markup, planning with margin
The classic. Prices go up 40% on cost, then the month is budgeted as if 40% of sales is profit.
Using the supplier price instead of landed cost
Leave out delivery and fees and both your markup and your margin look better than they are.
Mixing the two words when you compare
"Thirty percent" means very different prices depending on whether someone means markup or margin. Always ask which one.
Check Your Top Sellers This Week
Twenty minutes with your price list is enough.
Pull your top 10 items
Use your sales records or simply the items you reorder most often.
Write the landed cost
Supplier price plus your share of delivery and fees per unit.
Work out each margin
(Shelf price − Landed cost) ÷ Shelf price. Write it as a percentage.
Mark the surprises
Circle any item whose margin is much lower than you assumed. Lesson 06 shows how to reprice it.
Copy this: margin check for your top sellers
| Item | Landed cost | Shelf price | Peso profit | Margin |
|---|---|---|---|---|
| ____ | ₱ ____ | ₱ ____ | ₱ ____ | ____ % |
| ____ | ₱ ____ | ₱ ____ | ₱ ____ | ____ % |
| ____ | ₱ ____ | ₱ ____ | ₱ ____ | ____ % |
Margin = Peso profit ÷ Shelf price × 100.
Your Margin Starts With What You Pay
Pricing can only protect a margin that buying has already made possible.
Once you measure in margin, you see quickly that your landed cost decides most of the story. Scattered orders, several delivery fees and prices that change from supplier to supplier make that cost hard to pin down.
How Tail Stocks helps
Tail Stocks is a B2B wholesale marketplace for Philippine pet businesses. You buy from multiple suppliers in one place at their own wholesale prices, with no markup, and check out with one order, one delivery and one payment.
With your buying in one place, your landed cost is easier to see, and so is your real margin.
Key Takeaways
- Markup = (Price − Cost) ÷ Cost. Margin = (Price − Cost) ÷ Price.
- The peso profit is the same. Margin is always the smaller percentage.
- A 40% markup is only a 28.6% margin.
- Plan your month, your targets and your gross profit in margin.
- To hit a margin, your markup has to be higher than that margin.
Markup is a pricing shortcut. Margin is the truth about what each sale leaves you. Use both, but never mix them up when you plan.
Next lesson: how to set a price from your cost so you land on the exact margin you want.
Start every price from a clear cost
Buy from multiple pet suppliers in one place, at their own wholesale prices.
Create your Tail Stocks account