Guide to Calculate Margin vs Markup

This guide explains the difference between margin and markup—TMS uses markup for pricing, margin for display.

There always seems to be some confusion around the difference between Margin vs Markup. A Markup Percentage and Margin Percentage are both a type of Margin. A Margin is used to describe the difference between a buy and a sell rate.

Margin is calculated by finding the percentage of markup divided by the sell rate.

Formula:

  • Buy Rate / (1 - Margin Percentage) = Sell Rate
  • Margin Percentage = (Sell Rate - Buy Rate) / Sell Rate

If you would like to add a 25% margin to a shipment that costs $100.00 you would end up with a sell rate of $133.33 and a profit margin of $33.33.

$100 / (1 - .25) = x

$100 / 0.75 = $133.33

Markup is calculated by adding a percentage to a buy rate to calculate a sell rate.

Formula:

  • Buy Rate x (1 + Markup Percentage) = Sell Rate
  • Markup Percentage = (Sell Rate - Buy Rate) / Buy Rate

If you would like to add a 25% markup to a shipment that costs $100.00 you would end up with a sell rate of $125 and a profit margin of $25

$100 x 1 + 0.25 = x

$100 x 1.25 = $125

How are Margins and Markups used in the TMS?

  1. When a broker creates a margin for a customer, they are adding in a Markup Percentage and not a TRUE margin.
  2. When pricing is displayed in the Cost Calculations section of the site, it is using the margin calculation and NOT the markup calculation.

In this example a line-haul of $204.93 was given a 25% markup which nets a 20% margin.

Markup

$247.56 * 1.25 = $309.44 (25% markup, $61.89)

Margin

$61.89 / $309.44 * 100 = 20%

          Or

$247.56 / 0.80 = $309.4