Markup Calculator

How markup pricing works

Markup is the amount you add to cost, expressed as a percentage of that cost. If something costs you $24 and you mark it up 50%, you add $12 and sell it for $36. Retailers, contractors and restaurants often price this way because it is quick: multiply cost by 1 plus the markup and you have a price.

A 100% markup is often called keystone pricing in retail: the price is double the cost. Because markup is measured against cost, it has no upper limit. A $2 item sold for $10 carries a 400% markup.

Why your margin is lower than your markup

Margin uses the same profit but divides it by the selling price instead of cost. On the $24 item sold at $36, the $12 profit is 50% of cost but only 33.33% of the price. Your accountant, your lender and your income statement all talk in margin, so it helps to know both numbers.

If you have a margin target, don't use it as a markup. Adding 30% to cost gives a 23.08% margin, not 30%. Convert first: markup = margin ÷ (1 − margin). The table below the result shows common markups and the margins they really produce.

Choosing a markup

A markup has to cover more than the item. Every sale also carries a share of rent, wages, card processing fees, returns, shrinkage and marketing. Work out what those cost per sale, add the profit you want, and the markup falls out of the arithmetic rather than a rule of thumb.

Then check the price against what customers will pay and what competitors charge. If the market price is fixed, flip the question: enter the cost and the going price to see what markup and margin that leaves you.

The formulas

• C = cost
• P = selling price
• U = markup as a decimal (50% = 0.50)

Example

1. An item costs $24 and you want a 50% markup.
2. Markup in dollars = $24 × 0.50 = $12.
3. Selling price = $24 × 1.50 = $36.
4. Equivalent margin = $12 ÷ $36 = 33.33%, or 0.50 ÷ 1.50.
5. In reverse: cost $24, price $36 → markup = ($36 − $24) ÷ $24 = 50%.

Frequently asked questions