Formula
Price = cost × (1 + markup)Profit = cost × markupMargin = markup ÷ (1 + markup) How it works
Markup is the amount added on top of cost to set a selling price, expressed as a percentage of the cost. It is the natural way to price when you know what something costs you: a $50 item with a 40% markup sells for $70.
Markup always overstates your margin. The same $20 profit is 40% of the $50 cost but only 28.6% of the $70 price. Retailers often quote "keystone" pricing — a 100% markup, doubling the cost — which works out to a 50% margin.
When setting prices, make sure the markup covers not just the item cost but its share of overhead such as rent, wages, shipping and payment fees. Use the break-even calculator to check how many sales you need at a given price.
Frequently asked questions
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 25% markup gives 0.25 ÷ 1.25 = 20% margin. To go the other way, markup = margin ÷ (1 − margin).
What markup do I need for a 50% margin?
A 100% markup — selling at double the cost.