The markup formulas
Markup is how much you add on top of what an item costs you, as a percentage of that cost. Retailers, wholesalers and tradespeople use it because it starts from the number they know best: the cost.
Markup % = (Price − Cost) ÷ Cost × 100
Cost = Price ÷ (1 + Markup ÷ 100)
The calculator above solves for any one of the three when you know the other two.
Worked example 1: adding a markup
A café buys a bag of coffee beans for $12 and uses a 75% markup on retail goods.
$12 × 1.75 = $21. Profit per bag is $9.
Worked example 2: finding the markup
A reseller buys sneakers for ₹4,000 and sells them for ₹5,800.
(5,800 − 4,000) ÷ 4,000 × 100 = 45% markup. The margin on the same sale is 1,800 ÷ 5,800 = 31%.
Worked example 3: working back to cost
A shop sells a lamp for £90 and knows it always uses a 50% markup. What did it pay?
£90 ÷ 1.5 = £60. This trick helps when you see a shelf price and want to estimate a wholesale price.
Markup is not margin
This is the most expensive mix-up in pricing. Both use the same profit, but they divide by different numbers:
- Markup divides profit by cost.
- Margin divides profit by price.
So a 50% markup gives only a 33.3% margin. If your accountant says you need a 50% gross margin and you add 50% to cost, you will fall well short.
| You want this margin | Use this markup |
|---|---|
| 20% | 25% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
| 60% | 150% |
Margin = Markup ÷ (1 + Markup)
Common markup conventions
- Keystone (100%): double the wholesale cost. It is common in clothing, gifts and jewellery and gives a 50% margin.
- Cost-plus pricing: contractors and manufacturers often add 10–30% to the cost of labour and materials.
- Low-markup retail: supermarkets and electronics shops often work on small markups and rely on volume.
These are rough patterns, not rules. Your own costs, competitors and fees decide what works.
Markup on a whole order
The same formulas work for a whole job, not just one item. A builder’s materials cost $2,400 and labour costs $3,600, so the total cost is $6,000. With a 20% cost-plus markup, the quote is $6,000 × 1.2 = $7,200, and the builder keeps $1,200 before overheads. If the client pushes the price down to $6,900, the markup falls to 15%. Type the cost and the new price into the Markup % tab to see that instantly.
Tips
- Put every cost per unit into “cost”: product, freight, duty, packaging and payment fees. Marketplace fees can be large; check them with the eBay fee calculator or Amazon FBA calculator.
- Round to a sensible price after you calculate. $20.99 or $21 usually sells better than $20.87.
- Check the result against your margin goal with the profit margin calculator, and make sure you sell enough units to cover overheads with the break-even calculator.
- Negative markup means you are selling below cost, for example in a clearance sale. The calculator shows it as a negative percentage.