Clear explanation of profit margin vs markup formulas with real-world ecommerce calculation examples.
### Profit Margin vs Markup Defined
- **Profit Margin**: Net profit expressed as a percentage of **Total Revenue**.
$$\text{Margin \%} = \left( \frac{\text{Net Profit}}{\text{Revenue}} \right) \times 100$$
- **Markup**: Net profit expressed as a percentage of **Cost of Goods Sold**.
$$\text{Markup \%} = \left( \frac{\text{Net Profit}}{\text{Cost}} \right) \times 100$$
### Why Confusing Them Kills Profit
If your product costs **$10** and you add a **50% markup**, your selling price is **$15** (Profit = $5).
However, your **Profit Margin** is only **33.3%** ($5 / $15), NOT 50%! If platform fees devour 20%, your actual take-home pay is significantly lower than anticipated.