In my experience, many owners/executives confuse Price Increase, Markup, and Profit Margin. More often, the confusion is between markup and profit margin, and it quietly eats into their real profits.

The truth is, each one means something very different. Let’s break it down with a simple cup of coffee that costs $3 to make.

👉 Price Increase (10%) - based on selling price

Your coffee selling price is $5.

A 10% price increase adds $0.50, so new price = $5.50.Cost stays $3, profit = $2.50.Profit margin = 45.5%.

👉 Markup (10%) - based on cost.

If the coffee cost is $3, a 10% markup adds $0.30.Selling price = $3.30.Profit = $0.30.Profit margin = only 9%.

However, a $5 coffee with $3 cost gives you 66% markup.

👉 Profit Margin (10%) - profit compared to selling price.

On a $5 coffee, 10% margin = $0.50 profit.That means cost must be $4.50.

However, the cost is $3, you are already making 40% profit margin, not 10%.

✅ The truth is:

Price Increase changes your revenue.

Markup builds your selling price from cost.

Profit Margin shows what you really keep after costs.

Stop mixing them up. Review your pricing today and protect your profitability.

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