What is markup?
Markup is a simple pricing method: start with your cost and add a percentage to cover overheads and profit.
Formulas
Markup % = (Selling price − Cost) ÷ Cost × 100
Selling price = Cost × (1 + Markup %)
Markup vs margin
The two are often confused:
- Markup is based on cost.
- Margin ([gross profit](/glossary/gross-profit) margin) is based on selling price.
Margin = Markup ÷ (1 + Markup)
Example
A product costs $40 and sells for $60.
- Profit = $20
- Markup = 20 ÷ 40 = 50%
- Margin = 20 ÷ 60 = 33.3%
Quick reference
- 25% markup = 20% margin
- 50% markup = 33.3% margin
- 100% markup = 50% margin
Why it matters
Using markup when you meant margin (or the reverse) is a common pricing mistake that can leave a business underpricing every sale. Set prices with your target margin in mind, then check the markup needed to reach it.