Turn cost and price into markup, profit, and margin — and finally see the difference.
What is markup?
Markup is how much you add to your cost to set your selling price, expressed as a percentage of cost.
Markup % = (Price − Cost) ÷ Cost × 100
If a product costs you $40 and you sell it for $100, your markup is (100 − 40) ÷ 40 = 150%.
Markup vs margin — the #1 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.
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. Use this calculator to sanity-check both the markup you're applying and the margin it actually produces.
Frequently asked questions
How do you calculate markup?
Subtract cost from price, divide by cost, and multiply by 100. For example, a $40 cost sold at $100 is a (100 − 40) ÷ 40 = 150% markup.
What is the difference between markup and margin?
Markup is profit as a percentage of cost; margin is profit as a percentage of price. The same product can be a 150% markup and a 60% margin at once. Confusing the two is a common cause of underpricing.
How do I set a price from a target markup?
Multiply cost by (1 + markup ÷ 100). For a 150% markup on a $40 item: $40 × 2.5 = $100.
What is a good markup percentage?
It varies widely by industry — retail often uses 50–100%, while some products carry much higher markups. Choose a markup that covers your costs and target margin while staying competitive in your market.
How do you convert markup to margin?
Margin % = Markup % ÷ (100 + Markup %) × 100. For example, a 100% markup equals a 50% margin, and a 150% markup equals a 60% margin. This calculator shows both side by side so you never mix them up.
What is keystone pricing?
Keystone pricing is a retail rule of thumb: set price at double the cost, which is a 100% markup and a 50% margin. It is a quick starting point, but many categories need a higher markup to cover overhead and returns.