Markup Calculator — Markup vs Margin
Set prices with confidence. Enter your cost and a markup or target margin to get the selling price and profit, and stop mixing up markup and margin.
Selling price
| Markup | Equals margin | Price on a $40 cost |
|---|
How to use the markup calculator
- Enter your cost per unit, including shipping and any direct costs.
- Choose whether you know the markup, the margin you want, or the selling price.
- Read the price, profit, markup and margin. The chart converts common markups to margins.
Markup vs margin
Markup is profit as a percentage of cost; margin is profit as a percentage of price. An item that costs $40 and sells for $60 has a $20 profit, a 50% markup ($20 ÷ $40) and a 33.3% margin ($20 ÷ $60). Markup is always the larger number, which is why mixing them up leads to underpricing.
To hit a target margin, divide cost by (1 − margin). For a 40% margin on a $40 item, the price is $40 ÷ 0.6 = $66.67. Doing it the wrong way (adding 40% to cost) gives $56, which is only a 28.6% margin.
Retailers often talk about keystone pricing: a 100% markup, which equals a 50% margin. Restaurants focus on food cost percentage, the inverse of margin on ingredients. Whatever your industry, price from your target margin so that overhead and profit are covered, then check that the price works for customers.
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Frequently asked questions
What is the difference between markup and margin?
Markup divides profit by cost; margin divides profit by selling price. A 50% markup is a 33.3% margin.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 25% markup is 0.25 ÷ 1.25 = 20% margin.
How do I convert margin to markup?
Markup = margin ÷ (1 − margin). A 30% margin needs a 42.9% markup.
What is keystone pricing?
Doubling the cost: a 100% markup and a 50% margin.