Markup is profit expressed as a percentage of cost. You take what an item cost you, add a percentage of that cost, and the result is your selling price. It is the natural way to price when you are buying stock, because cost is the number you start from and the calculation runs forwards.
Margin is the same profit expressed as a percentage of the selling price. The two are never equal, and confusing them is the most expensive arithmetic mistake in retail. A 65% markup does not give a 65% margin — it gives 39.4%, because the denominator changed from cost to price. Markup is always the larger number, and the gap widens rapidly as profit rises.
On the defaults, $42.00 of cost with a 65% markup sells for $69.30. The profit is $27.30, which is 65% of cost but only 39.4% of the price. To achieve a 65% margin you would need a markup of 186% and a price of $120.00.
The formula
cost- What the item cost you
markup- Profit as a percentage of cost
price- Resulting selling price
margin- The same profit as a percentage of price
How to use this calculator
- Enter what the item costs you to buy or make.
- Enter the markup percentage you want to add to that cost.
- Read off the selling price on the gauge.
- Check the margin below — it is always lower than the markup.
Worked examples
A 65% markup on $42.00
$42.00 × 1.65 = $69.30. Profit is $27.30. As a percentage of the $42.00 cost that is 65%; as a percentage of the $69.30 price it is only 39.4%. Both describe the same $27.30.
The markup that gives a 50% margin
A 50% margin means cost is half the price, so the markup must be 100%. On $42.00 that is a price of $84.00. Applying a 50% markup instead gives $63.00 and a margin of only 33.3% — a shortfall of $21.00 per unit for anyone who confuses the two.
How to read your score
Frequently asked questions
What is the difference between markup and margin?
The same profit over a different denominator. Markup divides profit by cost; margin divides profit by selling price. Since the price is always larger than the cost, the margin percentage is always smaller than the markup percentage.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup), with both as decimals. A 65% markup is 0.65 ÷ 1.65 = 39.4% margin. Going the other way, markup = margin ÷ (1 − margin).
Can markup exceed 100%?
Easily, and it often does in hospitality and fashion. A 300% markup means the price is four times cost, which is a 75% margin. Margin, by contrast, can never reach 100% while the item has any cost at all.
Should markup be the same on every product?
Rarely. Keystone pricing — a flat 100% markup — is a starting convention, not a rule. Slow-moving stock, items with high handling costs and products with little competition all justify different treatment.
Does markup cover my overheads?
Only if it is set high enough. Markup covers the gross profit; rent, wages and everything else come out of that. Pricing on markup alone without checking it against total overheads is how businesses trade profitably per unit and still lose money.
Markup and margin reference
| Markup on cost | Multiplier | Margin on price | Markup needed for that margin |
|---|---|---|---|
| 10% | 1.10x | 9.1% | 11% |
| 20% | 1.20x | 16.7% | 25% |
| 25% | 1.25x | 20.0% | 33% |
| 50% | 1.50x | 33.3% | 100% |
| 65% | 1.65x | 39.4% | 186% |
| 100% | 2.00x | 50.0% | not attainable |
| 150% | 2.50x | 60.0% | not attainable |
| 300% | 4.00x | 75.0% | not attainable |
The last column is the markup you would need if the figure in the first column were a margin target instead.