MARKUP AND MARGIN STRUCTURE
1. What is Markup?
Markup tells you how much money you added to the original cost of the product to set your final selling price. It is always calculated as a percentage of the Cost.
The Question it Answers: "How much extra did we tack onto what we paid for this?"
Best Used For: Setting prices. It ensures you are covering your costs and making a specific profit on every item sold.
Example: If you buy a tour package for $100 and want a 50% markup, you add $50. Your selling price becomes $150.
2. What is Margin?
Margin (specifically Gross Profit Margin) tells you how much of your final selling price is actual profit. It is always calculated as a percentage of the Selling Price.
The Question it Answers: "Out of every dollar we took in from the client, how many cents do we actually keep?"
Best Used For: Measuring the health of your business. CEOs, accountants, and investors look at margins because it directly shows how much revenue is left over to cover operating expenses.
Example: If you sell a tour package for $150 and it cost you $100, your profit is $50. That $50 represents 33.3% of the total $150 you collected. Your margin is 33.3%.
