How to Calculate Markup — Markup Formula & Margin Explained
Markup is the percentage added to a product's cost to determine its selling price. It's one of the most important concepts in pricing strategy. The markup formula is: (Selling Price − Cost) ÷ Cost × 100. Critically, markup is different from profit margin — a common source of confusion in business.
Markup vs Margin — Key Formulas
Markup (based on COST)
Markup % = ((Price − Cost) ÷ Cost) × 100
Cost $40, Price $60 → Markup = 50%
Margin (based on PRICE)
Margin % = ((Price − Cost) ÷ Price) × 100
Cost $40, Price $60 → Margin = 33.3%
Selling Price from Markup
Selling Price = Cost × (1 + Markup ÷ 100)
Markup to Margin Conversion Table
| Markup % | Margin % | Sell Price (on $100 cost) |
|---|---|---|
| 10% | 9.1% | $110 |
| 20% | 16.7% | $120 |
| 25% | 20% | $125 |
| 33% | 24.8% | $133 |
| 50% | 33.3% | $150 |
| 75% | 42.9% | $175 |
| 100% | 50% | $200 |
| 200% | 66.7% | $300 |
Frequently Asked Questions
What is the difference between markup and margin?
Markup is calculated on cost: (Price − Cost) ÷ Cost × 100. Margin is calculated on price: (Price − Cost) ÷ Price × 100. A 50% markup equals a 33.3% margin. They are NOT the same number.
What markup percentage should I use?
It depends on your industry. Retail typically uses 50–100% markup (keystone pricing). Restaurants use 200–400%. Software/SaaS can be 500%+. The right markup covers costs, overhead, and desired profit.
How do I convert markup to margin?
Margin = Markup ÷ (1 + Markup). Example: 50% markup → 50 ÷ 150 = 33.3% margin. Or: Markup = Margin ÷ (1 − Margin).
What is keystone pricing?
Keystone pricing is a retail strategy of doubling the wholesale cost (100% markup). A product that costs $25 wholesale sells for $50 retail. It's a simple rule of thumb but may not work for all products.
Can markup be over 100%?
Yes, absolutely. A 200% markup means you're selling at 3× your cost. Luxury goods, software, and specialty products often have markups of 200–1000%.
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