Calculate markup percentage and selling price to ensure profitable pricing. Compare markup vs margin and get retail pricing recommendations.
Enter any two values to calculate the third. Leave one field empty.
Markup is the percentage amount added to the cost of a product to determine its selling price. It represents how much profit you make relative to what you paid for the item. Unlike profit margin which is based on the selling price, markup is calculated based on the cost, making it a more intuitive pricing method for many retailers and wholesalers.
The markup formula is: Markup % = (Selling Price - Cost) / Cost × 100. For example, if you buy a product for $50 and sell it for $75, your markup is 50%. This means you added $25 (50% of the cost) to the original cost to determine your selling price.
Understanding the difference between markup and margin is crucial for profitable pricing. Many businesses make costly mistakes by confusing these two metrics:
Markup is based on cost. It shows how much you add to your cost to get the selling price.
Markup = (Price - Cost) / Cost × 100
Example: Cost $60, sell for $100
Markup = ($100 - $60) / $60 × 100 = 66.67%
Use markup when: Setting prices based on cost, calculating selling price, retail pricing decisions
Margin is based on selling price. It shows what percentage of your revenue is profit.
Margin = (Price - Cost) / Price × 100
Example: Cost $60, sell for $100
Margin = ($100 - $60) / $100 × 100 = 40%
Use margin when: Analyzing profitability, comparing to industry benchmarks, financial reporting
⚠️ Important: Markup is Always Higher Than Margin
For the same dollar profit, markup percentage will always be higher than margin percentage because it's calculated on a smaller base (cost vs selling price). A 50% markup equals only a 33.3% margin. Never confuse the two when setting prices or you'll significantly undercharge customers.
Use this reference to quickly convert between markup and margin percentages:
| Markup % | Margin % | Cost $100 | Selling Price | Profit |
|---|---|---|---|---|
| 20% | 16.7% | $100 | $120 | $20 |
| 25% | 20% | $100 | $125 | $25 |
| 33.3% | 25% | $100 | $133 | $33 |
| 50% | 33.3% | $100 | $150 | $50 |
| 66.7% | 40% | $100 | $167 | $67 |
| 75% | 42.9% | $100 | $175 | $75 |
| 100% | 50% | $100 | $200 | $100 |
| 150% | 60% | $100 | $250 | $150 |
| 200% | 66.7% | $100 | $300 | $200 |
| 300% | 75% | $100 | $400 | $300 |
Different industries use different markup percentages based on their business models, competition, and operating costs. Here are typical markup ranges:
| Industry | Typical Markup | Equivalent Margin | Notes |
|---|---|---|---|
| Grocery Stores | 15-25% | 13-20% | High volume, low markup model |
| Restaurants | 200-400% | 67-80% | High markup on food, lower on beverages |
| Retail Clothing | 100-150% | 50-60% | Varies by brand positioning |
| Jewelry | 200-300% | 67-75% | High markup due to perceived value |
| Electronics | 20-40% | 17-29% | Competitive market, lower markups |
| Furniture | 100-200% | 50-67% | High markup to cover showroom costs |
| Pharmaceuticals | 200-5000% | 67-98% | Varies widely by drug type |
| Wholesale | 10-30% | 9-23% | Lower markup, higher volume |
| Handmade/Craft | 200-400% | 67-80% | Accounts for labor and uniqueness |
| Automotive Parts | 30-50% | 23-33% | Moderate markup with service revenue |
Setting the right markup requires balancing profitability with competitiveness. Follow this systematic approach to determine your optimal markup percentage:
Calculate All Your Costs
Include product cost, shipping, payment processing fees, packaging, storage, and a portion of fixed costs (rent, utilities, salaries). Many businesses underestimate total costs and set markups too low. Use the formula: Total Cost = Direct Costs + (Fixed Costs / Expected Units Sold).
Research Competitor Pricing
Analyze what competitors charge for similar products. Your markup should be competitive but not necessarily the lowest. If you offer better service, quality, or convenience, you can justify higher markups. Create a pricing matrix comparing features, quality, and prices across 5-10 competitors.
Consider Your Value Proposition
Higher markups are justified when you provide unique value: exclusive products, superior customer service, faster shipping, better warranties, or expert advice. Premium positioning allows 50-100% higher markups than budget competitors. Document your unique value points to justify pricing.
Factor in Market Demand
High-demand products with limited supply can support higher markups (100-300%). Commodity products in competitive markets require lower markups (20-50%). Use price elasticity testing: increase prices 5-10% on a subset of products and measure demand impact before full rollout.
Test and Adjust
Start with industry-standard markups and adjust based on sales velocity and customer feedback. If products sell out quickly, increase markup by 10-20%. If inventory moves slowly, reduce markup or add value. Review pricing monthly and adjust quarterly based on cost changes and market conditions.
Simply double your cost to get the selling price. This 100% markup (50% margin) is common in retail and provides a simple, consistent pricing rule.
Best for: Retail stores, boutiques, gift shops. Easy to calculate and provides healthy margins while remaining competitive.
Use the manufacturer's recommended price, which typically includes a built-in markup of 40-100% depending on the industry.
Best for: Electronics, appliances, branded goods. Ensures consistency across retailers and protects brand value.
Use different markup percentages for different product categories based on demand, competition, and turnover rate. High-demand items get lower markups, slow-moving items get higher markups.
Best for: Department stores, supermarkets, online marketplaces. Optimizes overall profitability across diverse inventory.
Calculate markup to reach psychologically appealing price points like $9.99, $49.95, or $99. Adjust markup slightly to hit these numbers rather than using fixed percentages.
Best for: Consumer products, e-commerce, retail. Increases perceived value and can boost conversion rates by 20-30%.
Confusing markup with margin and accidentally using margin percentages for markup calculations, resulting in prices that are too low
Using the same markup percentage for all products regardless of demand, competition, or turnover rate
Failing to include all costs in markup calculations - forgetting shipping, payment fees, packaging, or overhead allocation
Setting markups based on gut feeling rather than data analysis of costs, competition, and market demand
Never adjusting markups after initial setup - costs and market conditions change, pricing should too
Marking up too low on small items thinking customers won't pay more, resulting in unprofitable sales
A boutique buys a designer dress wholesale for $80. They want to achieve a 120% markup:
Result: Sell for $176 | Profit: $96 | Margin: 54.5%
A restaurant's pasta dish has a food cost of $4.50. Using a 300% markup (standard for restaurants):
Result: Menu price $18 | Profit: $13.50 | Margin: 75%
An electronics store buys headphones for $60. In this competitive market, they use a 35% markup:
Result: Sell for $81 | Profit: $21 | Margin: 25.9%
A jewelry maker's materials cost $25. Including labor time value, total cost is $45. Using 250% markup:
Result: Sell for $157.50 | Profit: $112.50 | Margin: 71.4%
Calculate gross and net profit margins
Calculate break even point
Calculate sales commission
Calculate salary and take-home pay
Convert hourly to annual salary
Calculate freelance hourly rate