For example, you might say, "I sold those goods at 20 points" or you might say "I sold those goods at 20% markup". Those two statements are not the same!
When you mark up something a percentage you take the cost of goods sold and you apply a percentage to it. For example, a $50 item with 20% markup would sell for $60 (50 x 1.2 = 60).
If instead you sell something for 20 points margin then that means that 20% of the total selling price of the item went to profit. So a $50 item that makes 20 points margin would sell for $62.50 . That means that you made $12.50 on a $62.50 sale or 20% (12.50 / 62.50 = 0.2).
When you're dealing with small margins/markups they can look very similar. For example, 5% markup translates to 4.76 points gross margin or 5 points gross margin translate to 5.26% markup. Outside of 5 points/percent and the difference is non-negligible.
Or to give another example you can look at 50% markup versus 50 points profit:
- A $100 item sells for $150 with 50% markup.
- A $100 item sells for $200 with 50 points gross profit.
That's a pretty significant difference when you're on the receiving end of the bill!