The difference between the cost of a product or service and its sale price is called the markup (or markon).
As a general rule of a successful business, markup must be set in such a way as to be able to cover your expenses and produce a reasonable profit.
For example, when you buy something for $80 and sell it for $100, your profit is $20. The ratio of profit ($20) to cost ($80) is 25%, so the **markup** is 25%.
**Markup describes the ratio of the profit to the cost paid**.
Markup can be confused with profit margin, which is a similar metric. The profit margin allows you to compare your profit to the sale price, not the purchase price.
For example, when you buy something for $80 and sell it for $100, your profit is $20. To calculate profit margin, we would compare $20 to $100, so the **profit margin** is 20%
Profit margin is a ratio of the profit to revenue.