Markup Formula

The basic markup formula is:

M = (P ÷ C) × 100

Where:

• M = Markup percentage
• P = Gross profit
• C = Cost price

Since gross profit P = R – C, markup can also be expressed as:

M = ((R – C) ÷ C) × 100

Where:

• R = Revenue (or Selling Price)
• C = Cost

This formula gives you the markup percentage you’re applying to a product.

Selling Price (Revenue) Formula

If you know the cost and your target gross margin (G), you can calculate selling price (R):

R = C ÷ (1 – G)

Example:

• Cost = $80
• Desired margin = 25% (0.25 in decimal)
• Selling Price = 80 ÷ (1 – 0.25) = $106.67

So, to achieve a 25% margin, you should sell the product for $106.67.

For similar calculations, you may also check out our Price Calculator.

Gross Profit Formula

Gross profit is the actual dollar amount you earn:

P = R – C

Or, using margin:

P = R × G

Example:

• Revenue = $200
• Margin = 30%
• Gross Profit = 200 × 0.30 = $60

Profit calculation becomes easier when you use a dedicated tool like our Profit Calculator.

Difference Between Markup and Margin

Many confuse markup with margin, but they measure profitability differently:

Metric	Formula	Focus	Example (Cost $100, Price $150)
Markup	(Profit ÷ Cost) × 100	Percentage over cost	(50 ÷ 100) × 100 = 50%
Margin	(Profit ÷ Revenue) × 100	Percentage of revenue	(50 ÷ 150) × 100 = 33.3%

• A 50% markup equals a 33.3% margin.
• Using margin-based pricing often makes it easier to forecast profitability.

To plan margin-driven targets, use our Profit Margin Calculator.

How to Calculate Markup Step by Step

Let’s walk through an example:

Step 1: Find Cost (C)
Suppose you manufacture a product for $120.

Step 2: Decide Desired Margin (G)
You want a 40% margin (0.40 in decimal).

Step 3: Calculate Selling Price (R)
R = C ÷ (1 – G) = 120 ÷ (1 – 0.40) = 120 ÷ 0.60 = $200.

Step 4: Calculate Gross Profit (P)
P = R – C = 200 – 120 = $80.

Step 5: Calculate Markup (M)
M = (P ÷ C) × 100 = (80 ÷ 120) × 100 = 66.7%.

This means selling at $200 gives you a 66.7% markup and a 40% margin.

Markup in Business Pricing Strategies

Markup is not just math—it’s a strategy. Businesses use markup to cover not only direct costs but also overheads (rent, salaries, marketing) and desired profit.

• Retailers often use fixed markup percentages across product categories.
• Manufacturers may adjust markup based on production costs and competition.
• Freelancers and service providers may use markup on labor hours or project costs.

To forecast how sales impact revenue, explore our Sales Calculator.

Markup Examples by Industry

Markup percentages vary widely depending on the industry:

Industry	Average Markup %	Notes
Grocery	10–25%	High volume, low margins
Restaurants	200–300%	Covers staff, rent, waste
Fashion Retail	100–250%	Trend-based, high risk
Electronics	20–50%	Competitive market
Jewelry	200–600%	Luxury pricing

Understanding industry standards helps businesses remain competitive while staying profitable.

Markup vs Cost-Plus Pricing

Markup is closely related to cost-plus pricing, where you add a percentage on top of the cost. For example, if a contractor adds 20% markup on material costs, a $5,000 project becomes $6,000.

But in competitive markets, simply applying markup may not work—you need to consider perceived value, demand, and competitors’ prices.

For setting revenue goals with precision, try our Profit Goal Calculator.

Common Mistakes with Markup

1. Confusing Markup and Margin – Charging a 50% markup when you actually intended a 50% margin can reduce profits drastically.
2. Ignoring Overheads – Markup should cover more than just material costs; factor in rent, utilities, salaries, and hidden expenses.
3. Not Adjusting for Industry Standards – Pricing too high or low compared to competitors can cost you customers.
4. Flat Markup on All Products – Different items may require different markup strategies.

Why Use a Markup Calculator?

Manually calculating markup can be tedious, especially if you handle multiple products. A Markup Calculator:

• Saves time
• Prevents errors
• Lets you test different margin scenarios instantly
• Helps with financial planning and goal setting

This ensures your pricing decisions are data-driven and profitable.

Markup is a cornerstone of business pricing. By using the Markup Calculator, you can calculate selling price, revenue, gross profit, and markup percentage with ease. Mastering these formulas helps you set prices that are competitive, sustainable, and profitable.

For complete pricing strategies, you may also explore related tools:

• Margin Calculator
• Price Calculator
• Sales Calculator
• Profit Calculator
• Profit Goal Calculator
• Profit Margin Calculator

By understanding markup and applying it correctly, you’ll not only cover costs but also grow your profit margins effectively.