Business Calculators
Markup Calculator
Apply a markup to your cost to reach a selling price, and see the resulting margin so you never confuse the two percentages again.
Overview
Why use a free markup calculator?
This free markup calculator turns a cost into a selling price. Enter what something costs you and the percentage you add, and it gives the price, along with the margin that markup actually represents, which is always a smaller number.
It also works backwards. Give it a cost and a price and it tells you the markup you have been applying; give it a price and a markup and it tells you what the cost must have been. And if you have a target margin rather than a target markup, it converts that too. That is the calculation most people need and almost nobody does correctly in their head.
The conversion table is a permanent part of the page rather than a result, because looking up what a 50% markup really means is the reason most people come here. It is 33.3% margin. Doubling the cost (the retail convention known as keystone pricing) is a 100% markup and a 50% margin.
Nothing you type is uploaded. Costs and prices are calculated in your browser and never transmitted, which matters when the figures are your own supplier pricing rather than a worked example.
Step by step
How to calculate markup and set a price
Choose what you know
Price from a cost and a markup, cost from a price and a markup, or the markup implied by a cost and a price.
Enter the figures
Add the cost, price or markup you have, and a quantity if you want the batch totals.
Read both percentages
The markup and the margin are shown together, because they describe the same profit and are never equal.
What you get
- Markup percentage to selling price
- Automatic markup-to-margin conversion
- Solve for cost or markup from a known price
- Reference table of common markups and their margins
- Per-unit and bulk pricing
- Formulas shown alongside results
Background
Markup and margin are the same profit, measured differently
Markup is what you add to a cost. Margin is what you keep out of a price. Both describe exactly the same money: the difference between what something cost you and what you sold it for. Because they divide that money by different numbers, they are never equal.
Buy for 100 and sell for 150 and the profit is 50 either way. As a markup that is 50 ÷ 100, which is 50%. As a margin it is 50 ÷ 150, which is 33.3%. Nothing about the transaction changed; only the denominator did. Markup divides by the cost, margin divides by the price, and the price is always the larger of the two, so the margin is always the smaller percentage.
The gap widens as the numbers grow, and faster than intuition suggests. A 25% markup is a 20% margin. A 50% markup is 33.3%. A 100% markup (doubling your cost) is a 50% margin. By 200% markup the margin is 66.7%. Markup has no ceiling; margin cannot reach 100%, because that would mean the item cost nothing.
This is why pricing by markup while reporting by margin goes wrong in one predictable direction. Told to hit 40%, someone who adds 40% to cost lands on a 28.6% margin: eleven points short, on every line, indefinitely. The conversion is not difficult: margin equals markup ÷ (1 + markup), and markup equals margin ÷ (1 − margin). It is simply never done, because both numbers are called percentages and look interchangeable.
Neither convention is wrong. Markup is the natural way to price from a supplier invoice, because the cost is the number in front of you. Margin is what accounts, investors and lenders read, because revenue is the number they start from. The mistake is only ever in moving between the two without converting.
Not to be confused with
- Margin
- The same profit as a share of the selling price rather than the cost, and always the smaller figure. Convert rather than assume: margin = markup ÷ (1 + markup). The Profit Margin Calculator works the identity from that end.
- Keystone pricing
- The retail habit of doubling the cost. A 100% markup and a 50% margin, worth naming because it is the pair most often misquoted, usually as a 100% margin, which is impossible.
- Cost-plus pricing
- Setting price by adding a fixed markup to cost, regardless of what the market would pay. Simple and defensible, and it leaves money on the table wherever customers value the thing more than it cost to make.
- Gross profit
- The money itself rather than either percentage. Ultimately what matters: a 60% markup on something cheap can be worth less than a 15% markup on something expensive, and percentages obscure that.
- Multiplier
- How some trades express the same thing: a 1.5x multiplier is a 50% markup, a 2x is 100%. Easier to apply mentally and easier still to confuse with margin, since a 2x multiplier is a 50% margin rather than a 200% anything.
- Recommended retail price
- A price suggested by the supplier rather than derived from your cost. Comparing your markup against RRP tells you what margin the supplier expects you to make, which is often the more useful question.
Reference
What goes into the calculation
The arithmetic is trivial and the inputs are where the money is lost. Almost every markup that turns out to be too thin was applied to a cost that was understated.
The cost
What the item genuinely costs you to have available to sell, not just the purchase price. Understating it is the most common error here, and it is invisible because the resulting percentage still looks healthy.
Required
The markup percentage
What you add to that cost. Whether it is enough depends entirely on what it has to cover beyond the item itself, which is a question about your overheads rather than about the product.
Required
Freight and duty inward
The cost of getting the goods to you. Part of the cost of sale, routinely left out because it arrives as a separate invoice, and on imported goods it can be a substantial share of the true cost.
Optional
Payment and platform fees
Two or three percent for card processing, considerably more for a marketplace. These come out of the price rather than being added to the cost, which is why a markup that looks adequate can leave far less than expected.
Optional
Returns and shrinkage
If a share of stock is returned, damaged or never sold, the units that do sell have to carry it. A 5% write-off rate means the effective cost of every sold unit is higher than the invoice says.
Optional
Quantity
Optional, and what turns a percentage into money. A markup is a rate; gross profit is the thing that pays wages, and the two rank products differently more often than people expect.
Optional
The margin it produces
Always shown alongside, because that is the figure your accounts will report. If a target has been set for you, check which of the two numbers it refers to before applying it.
Optional
What the market will bear
Outside the calculation and above it. Cost-plus gives a floor, not a price. Where customers value something well above its cost, a fixed markup simply hands them the difference.
Optional
Who it helps
Who prices by markup?
Retailers pricing from a supplier invoice
The cost is the number on the page, so adding to it is the natural move. Seeing the resulting margin at the same time is what keeps the shop's pricing and the shop's accounts describing the same business.
Wholesalers and distributors
Trade pricing is expressed in markup almost universally, and reported in margin almost universally. Converting deliberately at the point of pricing prevents a gap that only shows up at the year end.
Anyone given a target percentage
A target of 40% means very different things depending on which number it refers to: a 40% markup is a 28.6% margin. Establishing which one is meant costs one question and prevents a persistent shortfall.
Trades quoting materials
Materials are commonly marked up to cover handling, waste and the risk of carrying them. Working out what that markup leaves as a margin is how you find out whether it covers the work involved.
Makers and small manufacturers
Unit cost is knowable and price is a decision. A markup is a reasonable starting point, and comparing it against the margin needed to cover overheads is what turns it into a sustainable one.
Anyone reviewing existing prices
Entering a cost and the price you already charge shows the markup you have actually been applying, which is frequently not the one you think. Prices set years ago against costs that have moved are the usual culprit.
Do it properly
Best practices
Convert rather than assume
Margin equals markup ÷ (1 + markup); markup equals margin ÷ (1 − margin). Neither is difficult and neither is ever done by eye. Doing the conversion once, at the point of pricing, is what stops the two numbers drifting apart.
Establish which number a target refers to
'Aim for 40%' is ambiguous and the two readings differ by more than eleven points. One question at the time it is set is much cheaper than discovering the answer in the annual accounts.
Mark up the true cost, not the purchase price
Freight, duty, handling, returns and wastage all belong in the cost before the markup is applied. A generous-looking markup on an understated cost is the most common way a product turns out unprofitable.
Check what the markup has to cover
Gross profit pays for rent, salaries, marketing and everything else before any of it is yours. A markup sized only to cover the item is not a pricing strategy. Work backwards from total overheads instead.
Look at gross profit as well as the percentage
A high markup on a cheap item can be worth less than a modest one on an expensive item. Multiplying by realistic volumes regularly reverses which product looks worth stocking.
Treat cost-plus as a floor
It tells you what covers your costs, not what the thing is worth. Where customers clearly value something above its cost, a fixed markup gives that difference away for nothing.
Revisit markups when costs move
A markup set against a cost that has since risen quietly becomes a smaller margin. Re-running the numbers when supplier prices change is the difference between a price rise and an unnoticed squeeze.
Avoid these
Common mistakes
Applying a target margin as a markup
Convert first. Adding 40% to a cost of 100 gives 140, which is a 28.6% margin rather than 40%. The correct price is 166.67: nearly 27 more per unit, on every unit, for as long as the mistake stands.
Reporting a markup as though it were a margin
State which one you mean, and convert before handing the figure to anyone who will act on it. A 50% markup reported as a 50% margin overstates profitability by a third, and forecasts built on it are optimistic by a growing amount.
Believing that doubling the price gives a 100% margin
It gives a 50% margin and a 100% markup. Margin cannot reach 100% at all, since that would mean the item cost nothing, so any target margin near it is a sign that someone is thinking in markup.
Marking up only the supplier's invoice price
Include freight, duty, handling, returns and wastage in the cost first. These routinely add several percent, and a markup applied before them is smaller in reality than it appears on the spreadsheet.
Forgetting that fees come out of the price
Payment processing and marketplace commission reduce what you receive rather than increasing what you paid. Account for them separately, or a markup that looks sufficient will not be.
Using one markup across everything
Different products carry different handling, wastage and turnover. A single blanket markup overprices the easy lines and underprices the difficult ones, which is a slow way to end up with a catalogue of the wrong things.
Setting a markup once and never revisiting it
Costs move and markups do not follow by themselves. A markup set three years ago against today's costs is a smaller margin than it was, and the shortfall compounds quietly across the whole range.
FAQ
Frequently asked questions
Ready to run your numbers?
Markup Calculator is at the top of this page. Free, no signup, nothing uploaded.