Markup Calculator
Pricing Details
Unit cost to you.
Desired profit on cost.
Recommended Selling Price
This price gives you a % Gross Margin.
What is Markup?
Markup is the amount you add to the cost price of a product to arrive at the selling price. It determines how much money you make on each item.
Markup is usually expressed as a percentage of the Cost. This makes it different from "Margin," which is profit expressed as a percentage of the Revenue (Selling Price).
How to Calculate Markup
The formula is simple:
For example, if a coffee mug costs you $5 to buy and you want a 50% markup:
- Cost = $5.00
- Markup = 50% (or 0.50)
- Price = $5.00 × 1.50 = $7.50
You profit $2.50 per mug.
Markup vs. Margin: The Cheat Sheet
It is vital not to mix these up. If you want a 50% Profit Margin, you cannot just use a 50% Markup. You need a 100% Markup.
| Desired Margin | Required Markup | Multiplier |
|---|---|---|
| 20% | 25% | 1.25x |
| 33% | 50% | 1.50x |
| 50% | 100% | 2.00x |
| 66% | 200% | 3.00x |
Common Markup Strategies
- Keystone Pricing (100% Markup): The standard for many clothing and gift retailers. Buy for $10, sell for $20.
- Skimming Strategy: Setting a very high initial markup (e.g., 500%) for a new, unique product where demand is high and competition is low (like the latest iPhone at launch).
- Penetration Pricing: Setting a very low markup (e.g., 5-10%) to enter a crowded market and win customers with cheap prices.
Frequently Asked Questions
Does markup include tax?
No. Markup is based on the cost of the goods themselves. Sales tax is added on top of the final selling price at the register.
Is a higher markup always better?
Not necessarily. If your markup is too high, your price might be higher than competitors', leading to fewer sales. The goal is to maximize total profit (Profit per item × Units sold), not just profit per item.