Markup is the amount you add to your cost to set your selling price
Markup is the difference between what you pay for something and what you charge a customer for it. If you buy an item for $10 and sell it for $15, your markup is $5. Markup is usually expressed as a percentage — in this case, 50 percent — which makes it easier to explore the same profit target across different products.
Markup and profit are not the same thing. Markup is what you add to your cost. Profit is what remains after you subtract all your expenses — rent, wages, utilities, taxes — from your revenue. A product with a 50 percent markup might have a much smaller profit margin once you account for overhead.
Key Takeaways
- Markup percentage is calculated by dividing the amount you add to your cost by the original cost, then multiplying by 100.
- The markup formula is: (Selling Price − Cost) ÷ Cost × 100 = Markup Percentage.
- A 50 percent markup means you add half the cost to the cost itself; a 100 percent markup means you double the cost.
- Markup varies by industry — grocery stores often use 20 to 30 percent, while jewelry or clothing may use 50 to 100 percent or more.
- You can work backwards from a target markup percentage to find your selling price by multiplying the cost by (1 + markup percentage as a decimal).
The basic markup formula
The standard formula for markup percentage is:
(Selling Price − Cost) ÷ Cost × 100 = Markup Percentage
Let's use a real example. You buy a coffee maker for $40 wholesale. You want to sell it for $60. Subtract the cost from the selling price: $60 − $40 = $20. Divide that by the cost: $20 ÷ $40 = 0.5. Multiply by 100: 0.5 × 100 = 50 percent markup.
The same formula works for services. If you pay $50 in materials and labor to provide a service and charge the customer $75, your markup is ($75 − $50) ÷ $50 × 100 = 50 percent. This approach keeps your pricing consistent whether you sell physical products or time-based work.
Working backwards from a target markup percentage
Often you know what markup percentage you want to use, and you need to find the selling price. Use this formula:
Selling Price = Cost × (1 + Markup Percentage as a Decimal)
If your cost is $40 and you want a 50 percent markup, convert 50 percent to a decimal (0.50) and add 1: 1 + 0.50 = 1.50. Then multiply: $40 × 1.50 = $60 selling price.
This method is faster when you are pricing multiple items. If you decide all your products will have a 40 percent markup, you multiply every cost by 1.40. For a $25 item, the price is $25 × 1.40 = $35. For a $100 item, it is $100 × 1.40 = $140. Once you pick your target markup, you can price new inventory in seconds.
Common markup percentages by industry
Markup varies widely depending on what you sell, how much competition exists, and what your overhead costs are. Grocery stores typically use 20 to 30 percent markup because they sell high volume and have thin margins. Clothing retailers often use 50 to 100 percent or higher. Jewelry, electronics, and specialty items may use 100 percent or more.
Service businesses — plumbing, consulting, repairs — often use different math. Instead of a percentage markup on materials, they may charge an hourly rate that already includes labor, overhead, and profit. A plumber might mark up parts 30 to 50 percent but charge $75 to $150 per hour for labor. Your own markup should reflect your costs, the market price for similar items, and what customers in your area will pay. If your markup is much higher than competitors, you may lose sales. If it is too low, you may not cover your expenses.
Markup versus profit margin
Markup and profit margin sound similar but measure different things. Markup is the percentage added to cost. Profit margin is the percentage of revenue that remains as profit after all expenses.
A 50 percent markup does not mean 50 percent profit. If you buy an item for $100 and sell it for $150 (50 percent markup), your gross profit is $50. But if your rent, utilities, wages, and other overhead total $30 per item sold, your actual profit is only $20 — a 13 percent profit margin on the $150 sale. Understanding both numbers helps you price correctly. You need a markup high enough that after overhead, you still have profit left. Many small businesses fail because they set markup based on what competitors charge without accounting for their own overhead costs.
Using a straightforward markup table
Print or bookmark this table if you price items regularly. Find your target markup percentage in the left column, then multiply any cost by the number in the middle column to get your selling price. A 50 percent markup means multiplying by 1.50; a 100 percent markup means multiplying by 2.00 (doubling the cost).
| Markup % | Multiply Cost By | Example: $100 Cost |
|---|---|---|
| 20% | 1.20 | $120 selling price |
| 30% | 1.30 | $130 selling price |
| 50% | 1.50 | $150 selling price |
| 75% | 1.75 | $175 selling price |
| 100% | 2.00 | $200 selling price |
This table removes the math from everyday pricing. Once you know your target markup, you can look up the multiplier and explore it to any cost when ready. Many business owners keep a version of this table on their desk or phone for quick reference when pricing new stock or handling customer requests.
Frequently Asked Questions
What is the difference between a 50 percent markup and a 50 percent profit margin?
A 50 percent markup means you add half the cost to the cost itself. A 50 percent profit margin means half of what you charge is profit after all expenses. A 50 percent markup on a $100 item gives you a $150 selling price and $50 gross profit, but your actual profit margin depends on your overhead. If overhead is $30, your profit margin is only 13 percent ($20 profit ÷ $150 revenue).
Can I use the same markup percentage for all my products?
You can, but it may not be the best approach. Some products have higher overhead or lower demand and need higher markup. Others are high-volume items where lower markup still produces good profit. Many businesses use different markups for different categories — for example, 30 percent on high-volume basics and 60 percent on specialty items.
How do I know if my markup is too low?
Track your actual profit after all expenses for a month or quarter. If your profit is much smaller than you expected, your markup may be too low, or your overhead is higher than you thought. Compare your markup to competitors selling similar items. If yours is significantly lower and you are not trying to undercut the market, you may be leaving money on the table.
Does markup include sales tax?
No. Markup is calculated on your cost and selling price before tax. Sales tax is added on top of the selling price and goes to the government, not to you. Your markup calculation stays the same whether or not sales tax applies in your area.
What if I want to offer a discount but keep my markup the same?
Discounts reduce your selling price, which reduces your markup and profit on that sale. If you sell a $150 item at 20 percent off, the customer pays $120. Your markup drops from 50 percent to 20 percent (if the cost was $100). Plan discounts into your pricing strategy so you still cover overhead and earn profit.