Plain definition
Markup is the amount added to cost to set a price, usually expressed as a percentage of cost. It differs from gross margin, which expresses profit as a percentage of selling price.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A product costs and is priced with 25% markup, so price is . The resulting gross margin is 20% of price, not 25%; confusing the bases can understate the price needed.
A buyer asks for a 20% discount. The seller with cost and price already has 25% markup but only 20% gross margin; the discount would erase profit unless cost or scope changes.
Why it matters
Markup and margin use different denominators. Confusing them can make a quoted target look met when it is not.
Practical consequence
Write the cost base and formula in the quote review, calculate price and gross margin separately, and revisit cost when supplier, freight, or warranty risk changes.
Try your own numbers
Separate profit per unit, margin on selling price, markup on cost, and a target-margin price.
Margin and markup