How to calculate markup
Markup is the amount you add to the cost of a product or service to reach its selling price, expressed as a percentage of the cost. It answers a simple question: how much more than cost am I charging?
The formula is:
Selling price = Cost × (1 + Markup% ÷ 100)
Profit = Cost × (Markup% ÷ 100)So if a product costs you $100 and you apply a 50% markup, you add $50 of profit and sell it for $150. The calculator above does this live as you type.
A worked example
Say you run a small print studio. A batch of business cards costs you $40 in materials and machine time. You want a 75% markup to cover your skill, overhead, and a healthy profit:
- Cost: $40
- Markup: 75% → $40 × 0.75 = $30 profit
- Selling price: $40 + $30 = $70
- Profit margin: $30 ÷ $70 = 42.9%
Notice the markup (75%) and the margin (42.9%) describe the same $30 of profit from two different angles. That difference trips a lot of people up — so it's worth pinning down.
Markup vs. margin: the difference that matters
Both measure profit, but against a different base:
- Markup = profit ÷ cost
- Margin = profit ÷ selling price
Because the selling price is always bigger than the cost, the margin percentage is always smaller than the markup percentage. Confusing the two is a classic way to under-price: a shop owner who "wants a 30% margin" but applies a 30% markup ends up with only a 23% margin and quietly leaves money on the table. Here is how common markups translate:
| Markup | Equivalent margin |
|---|---|
| 20% | 16.7% |
| 25% | 20.0% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
| 150% | 60.0% |
To convert markup to margin directly: Margin% = Markup% ÷ (100 + Markup%) × 100.
Common mistakes when setting markup
- Treating markup and margin as the same number. They never are unless profit is zero. Decide which one your industry quotes in, and stay consistent.
- Marking up only the obvious costs. Materials are easy to count; your time, software, payment fees, and the occasional refund are not. Fold realistic overhead into "cost" before you mark up.
- Using one markup for everything. Fast-moving, low-risk items can carry a thinner markup than custom or slow-selling work. Match the markup to the effort and the risk.
Frequently asked questions
Is a higher markup always better?
Not necessarily. A high markup raises profit per sale but can reduce how much you sell. The right markup is the one that maximises total profit — price × volume — not the one with the biggest percentage.
What is a "good" markup?
It varies wildly by industry: groceries run on single-digit markups and high volume, while bespoke services often run 100% or more. Compare yourself to your own sector, not to a universal number.
Does markup include sales tax or VAT?
No. Markup is about your cost and your profit. Sales tax or VAT is added on top of the selling price and passed to the tax authority — use our sales tax calculator for that step.
Once you've set your price, turn it into a clean, professional document with the free invoice generator, or check the profit margin calculator to work backwards from a target margin. For pricing strategy, see how to write a quote.