A 40 percent markup is not a 40 percent margin — it is a 28.6 percent margin. The difference compounds through every pricing conversation you will ever have.
Markup versus margin
Markup is profit divided by COST: a $87 profit on a $62 cost is a 140 percent markup. Margin is profit divided by PRICE: the same dollar is a 58 percent margin. Investors, accountants and banks speak margin. Most sales teams speak markup. Knowing both conversions fluently prevents the classic mis-pricing disasters.
Frequently asked questions
What gross margin should a software company target?
Healthy SaaS products run 70–85 percent gross margin. Below 60 percent usually means services revenue is hiding inside 'product' revenue — worth unpacking before a fundraise.
Connectica provides information only, not financial, investment, legal or tax advice. Figures on this page are estimates and generalizations — confirm anything that matters with the relevant professional or authority.