Markup formulas
Three formulas cover almost every pricing question:
- Markup % = (price − cost) ÷ cost × 100
- Selling price = cost × (1 + markup ÷ 100)
- Margin % = (price − cost) ÷ price × 100 = markup ÷ (100 + markup) × 100
Example: you buy a lamp for 40 and want a 60% markup. The price is 40 × 1.6 = 64, the profit is 24, and the gross margin is 24 ÷ 64 = 37.5%.
Markup vs margin at a glance
Markup is measured against cost and margin against price, so the markup number is always the bigger of the two for the same sale:
| Markup | Margin |
|---|---|
| 20% | 16.7% |
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
| 150% | 60% |
If a supplier, buyer or accountant talks about "30%", ask which one they mean. Setting prices with a 30% markup when you needed a 30% margin leaves you about 7 points short. To start from a target margin instead, use the margin calculator. Our guide profit margin vs markup explains it with worked examples.
Setting prices that really make money
Markup on the purchase price is only the start. Before you settle on a price, check that it also covers:
- delivery, packaging and payment processing fees on each sale;
- a share of fixed costs such as rent, software and insurance;
- discounts and promotions (a 20% sale on a 25% markup leaves almost no profit; try it in the discount calculator);
- sales tax or VAT, which is added on top and is not your income (see the VAT calculator).