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Understanding Margin vs. Markup in Product Pricing

When setting up product pricing in Floorzap, it’s important to understand the difference between Margin and Markup. These two methods use different calculations to determine your selling price, and choosing the right one ensures your pricing reflects your business goals.

This article explains how each method works, how Floorzap applies your settings, and how to troubleshoot common pricing issues.

Margin vs. Markup: What’s the Difference?

Floorzap allows you to choose either Margin or Markup as your preferred calculation method for product pricing. Only one can be active at a time.

Markup

  • Definition: The percentage added on top of your product’s cost.

  • Built On: Cost

  • Used For: Determining how much to charge above what you paid.

  • Example: A 50% markup on a $100 cost creates a $150 selling price.

Margin

  • Definition: The percentage of the final selling price that is profit.

  • Built On: Selling Price

  • Used For: Ensuring a specific portion of the price is profit.

  • Example: A 50% margin on a $100 selling price means there is $50 in profit.

Important Relationship

  • 100% Markup = 50% Margin

  • A 100% Margin is not possible unless a product has a cost of $0.

How Margin Affects Product Pricing

When you choose Margin, Floorzap calculates the selling price so that the chosen percentage represents the profit portion of the final price.

Example (Product Cost = $204):

Desired Margin Resulting Sale Price Explanation
50% $408 Cost makes up half, profit makes up half.
99.9% $20,400 Cost represents only 0.1% of the final price, resulting in a very high selling price.

This is why entering very high margin percentages can lead to extremely large calculated prices, it’s working as designed.

Where to Set Margin or Markup in Floorzap

To select how your sales percentage is calculated:

  1. Go to Settings

  2. Open System Settings

  3. Select Initial Settings

  4. Enable or disable Calculate Sales Percentage Based on Margin

  • When enabled → your percentage is treated as Margin

  • When disabled → your percentage is treated as Markup

Troubleshooting Unexpected Pricing

If your product prices seem unusually high or incorrect, the issue is often caused by mixing up margin and markup.

1. Identify Unexpected Prices

Look for selling prices that seem unrealistically high (e.g., $20,000+ for a standard product).
This usually indicates a margin was entered when a markup was intended.

2. Check Your Calculation Setting

Verify whether Calculate Sales Percentage Based on Margin is turned on.

3. Confirm What You Intended

Ask yourself:

  • Did I want to add a certain percentage on top of cost? → Markup

  • Did I want to keep a certain percentage as profit? → Margin

4. Correct the Percentage

If you enter 100% while using margin, the system attempts to get as close to a 100% margin as possible, resulting in extremely large selling prices.

Example:

  • Product cost: $1,594

  • If you want to “double the price”

  • Incorrect: entering 100% margin

  • Correct: enter 50% margin to achieve a $3,188 selling price.

5. Remember the Core Difference

  • Markup: Based on cost → “How much do I add?”

  • Margin: Based on price → “How much do I keep?”

Summary

Choosing the correct method, Margin or Markup, ensures your product pricing behaves the way you expect. If your selling prices look off, review your system setting and confirm which method your business intends to use.

If you need help reviewing your configuration or correcting pricing, our support team is here to assist.