What is markup?
Markup is how much you add to your cost to set your selling price, expressed as a percentage of cost. It's the pricing lever every retailer, wholesaler, and brand owner pulls — whether they realize it or not.
Markup % = (Price − Cost) ÷ Cost × 100
If a product costs you $40 and you sell it for $100, your markup is (100 − 40) ÷ 40 = 150%. You added 150% of the cost on top to reach the final price.
How to calculate markup (step by step)
- Know your cost per unit — what you pay the supplier or manufacturer, per item.
- Set or check your selling price — the price your customer actually pays.
- Find profit per unit = Price − Cost.
- Divide profit by cost × 100 — that's your markup percentage.
The same process works in reverse if you're setting price from cost: decide your target markup, then multiply cost by (1 + markup ÷ 100).
Worked example: wholesale to retail pricing chain
A typical product moves through multiple hands, each applying markup:
| Stage | Cost per unit | Markup applied | Selling price | Profit per unit | Margin | |---|---:|---|---:|---| | Manufacturer | $18 (materials) | 50% | $27.00 | $9.00 | 33% | | Wholesaler | $27.00 | 30% | $35.10 | $8.10 | 23% | | Retailer | $35.10 | 150% | $87.75 | $52.65 | 60% |
The retailer's 150% markup on a $35.10 wholesale cost produces the $87.75 shelf price. That same 150% markup results in a 60% profit margin — two ways of describing the exact same money. Walk a product from manufacturing cost through wholesale and retail markup to see where margin accumulates (or erodes) at each link.
Markup vs margin — the #1 pricing confusion
This trips up almost everyone. Markup is based on cost; margin is based on price. Same product, two different numbers:
- Markup = profit ÷ cost = $60 ÷ $40 = 150%
- Margin = profit ÷ price = $60 ÷ $100 = 60%
A 150% markup and a 60% margin describe the exact same $40-cost, $100-price product. Mixing them up leads to serious underpricing — telling your team "we need 50% margin" and applying it as a 50% markup leaves money on the table on every sale.
Quick conversion table
| If your markup is… | Your margin is… | Common in… |
|---|---|---|
| 50% | 33% | Electronics, tight competition |
| 100% | 50% | Keystone pricing baseline |
| 150% | 60% | Apparel, typical retail |
| 200% | 67% | Jewelry, specialty goods |
| 300% | 75% | High-end, exclusive products |
| 400% | 80% | Brand/IP-heavy categories |
This calculator shows markup and margin side by side so you never do mental conversion.
The formula to convert markup to margin (and back)
- Markup → Margin: Margin % = Markup % ÷ (100 + Markup %) × 100
- Margin → Markup: Markup % = Margin % ÷ (100 − Margin %) × 100
A 150% markup → 150 ÷ 250 = 60% margin. A 60% margin → 60 ÷ 40 = 150% markup. They always describe the same profit — just from different denominators.
Setting price from a target markup
To price from cost: Price = Cost × (1 + Markup ÷ 100). Want a 150% markup on a $40 item? $40 × 2.5 = $100.
To find the markup you're already getting: look at your current price, subtract cost, and divide by cost. Many business owners discover their markup is lower than they assumed — especially once discounts, shipping, and returns are factored in. Pair this with the discount calculator to model how promotions eat into the markup you planned.
Why markup matters beyond pricing
Markup determines how much room you have for every expense downstream. A low-markup product leaves thin margin for marketing, overhead, and profit. A higher markup gives you flexibility: you can spend more on ads (check with the ROAS calculator), absorb a price promotion, or cushion rising supplier costs. Markup also feeds directly into your break-even volume — use the break-even calculator to connect markup to the number of units you need to sell. And when you need to justify pricing to a buyer or investor, markup and profit margin together tell the complete unit economics story.