What Is Markup?

Markup is the amount added to a product's cost price to set its selling price, expressed as a percentage of that cost. It answers the question "how much profit am I adding on top of what this cost me?" — and it's the number most small businesses set first when pricing a product.

Markup is one of the first pricing concepts any retailer, wholesaler, or e-commerce seller learns, because it directly ties the price you charge to the cost you paid. Unlike margin, which measures profit against the selling price, markup measures profit against the cost — a subtle difference that trips up a lot of people doing pricing math for the first time.

The Formula

Markup % = ((Selling Price − Cost) ÷ Cost) × 100

Worked Example

Say a boutique buys a jacket wholesale for $50 and wants a 40% markup. Selling Price = 50 × (1 + 0.40) = $70. Check it against the formula: ((70 − 50) ÷ 50) × 100 = 40%. The store makes $20 profit on each jacket sold at $70.

CostMarkup %Selling PriceProfit
$5020%$60$10
$5040%$70$20
$50100%$100$50

Markup Is Not the Same as Margin

This is the single most common pricing mistake: confusing markup with margin. A 100% markup on that $50 jacket sets the price at $100 — but the profit margin on that $100 sale is only 50% ($50 profit ÷ $100 price), not 100%. Markup is always a bigger-looking number than margin at the same dollar profit, because it's calculated on a smaller base (cost instead of price).

To convert: Margin % = Markup % ÷ (1 + Markup %). A 50% markup converts to a 33.3% margin; a 100% markup converts to a 50% margin. Mixing the two up when setting prices can quietly erase your expected profit.

Figures above are illustrative estimates only, not financial or tax advice. Actual pricing should also account for overhead, competition, and target profit goals.

Frequently Asked Questions

What is markup in simple terms?

Markup is the percentage added to a product's cost to determine its selling price. If an item costs $50 and you add a 40% markup, you sell it for $70.

What is the markup formula?

Markup % = ((Selling Price - Cost) / Cost) x 100. You can also find selling price directly: Selling Price = Cost x (1 + Markup %).

Is markup the same as profit margin?

No. Markup is profit as a percentage of cost, while margin is profit as a percentage of selling price. A 50% markup and a 50% margin represent very different actual profit amounts.

How do I convert markup to margin?

Margin % = Markup % / (1 + Markup %). For example, a 100% markup equals a 50% margin, and a 50% markup equals a 33.3% margin.

What markup percentage should I use?

It depends on industry, overhead, and competition. Retail commonly uses 50-100% markup, restaurants often use 200-300% on food cost alone, and wholesale/distribution often runs much lower, 10-30%.

Why do businesses track markup instead of just setting prices?

Consistent markup percentages help ensure every product covers its cost plus a predictable profit contribution, making pricing scalable across hundreds or thousands of SKUs.

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