Markup calculator: How to set a price from your cost

Markup is how most businesses actually set prices: take what the thing costs you, add a percentage on top, and that is the price. Enter any two of cost, markup, sale price, or profit below and this calculator fills in the other two.

It also shows the margin alongside the markup, because those two numbers are not the same and confusing them is the most expensive arithmetic mistake in pricing. A 25% markup is a 20% margin. Add units sold and it converts the per-unit figures into total profit.

Markup is profit expressed as a percentage of cost.

Buy something for $80, sell it for $100, and you made $20. Compare that $20 to the $80 you paid and you get 25%. That is the markup. It answers a builder's question: given what this costs me, how much am I adding on top?

The number belongs to whoever owns the cost. A distributor marks up the wholesale price, an agency marks up the delivery cost of an hour, a manufacturer marks up the bill of materials. In every case the denominator is money already spent, which is why markup feels concrete in a way that most pricing metrics do not. You know your cost. Everything else is a decision.

Markup = Profit ÷ Cost

Multiply by 100 for a percentage. If you know the sale price rather than the profit, the same formula expands to:

Markup = (Sale price − Cost) ÷ Cost

And the version you will use most often, because it is the one that produces a price:

Sale price = Cost × (1 + Markup)

Three quantities, one equation, so any two of them determine the rest. That is why the calculator above solves in every direction. Give it a cost and a target markup and it prices the product. Give it a cost and a price and it tells you what markup you are already running.

Both compare the same profit to a different base. Markup divides by cost. Margin divides by the sale price.

Because the sale price is always larger than the cost on a profitable sale, the margin is always the smaller of the two numbers. On that $80 item sold for $100, the markup is 25% and the margin is 20%. Same $20 of profit, two different denominators.

The gap widens fast as the numbers grow:

To convert between them:

Margin = Markup ÷ (1 + Markup)

Markup = Margin ÷ (1 − Margin)

The practical damage happens when someone is told to hit a 40% margin and applies a 40% markup instead. That prices the product at cost × 1.40, which delivers a 28.6% margin, so every unit ships more than eleven points of margin short of target. Nobody notices until the quarter closes. The calculator above reports both figures at once for exactly this reason.

Note also what markup cannot do. Margin has a ceiling of 100%, because profit can never exceed the price. Markup has no ceiling at all. A cost of $1 sold for $50 is a 4,900% markup, which sounds absurd and is simply a 98% margin.

A physical product. Your landed cost per unit is $18: manufacturing, freight, duty, and inbound handling. You want a 150% markup, which is roughly what a direct-to-consumer brand needs to cover paid acquisition and still make money.

Sale price = $18 × (1 + 1.50) = $45

Profit is $27 a unit, a 60% margin. Now the real question: your blended acquisition cost is $32 per customer. On a single unit you are $5 underwater, and the business only works if the second order arrives. Markup sets the price. It does not tell you whether the price works.

An agency hour. A senior consultant costs $85 an hour fully loaded, meaning salary, payroll taxes, benefits, and an allocation of overhead. You bill $255.

Markup = ($255 − $85) ÷ $85 = 2.00 = 200%

Agencies quote this as a 3x multiple on cost, and 3x cost is the same thing as a 200% markup. The trap sits in the word "fully loaded." If the $85 covers salary alone and ignores the 30% of the consultant's time spent on internal work, the effective cost per billable hour is closer to $121, and the real markup is 110%.

A resold software licence. You buy seats at $14 a month and resell them at $22 inside a managed service.

Markup = ($22 − $14) ÷ $14 = 0.571 = 57.1%

That is a 36.4% margin on $8 of gross profit per seat per month. Resale markups look thin next to product markups because there is almost no cost of goods to hide behind, and the entire economic argument rests on volume plus whatever the service wrapped around the licence is worth.

Cost-plus pricing is the most widely used pricing method there is, and it survives because it is defensible, fast, and requires no research. Pick the markup that is normal for your sector, apply it to unit cost, and you have a price you can justify to anyone.

The conventions themselves are rules of thumb rather than measured averages, and they are worth reading as folklore with a logic underneath rather than as data:

That last point generalises. High markup percentages do not mean high profits. Restaurants run some of the highest markups in the economy and some of the thinnest net margins, because everything that makes the business expensive sits below the gross profit line.

It ignores demand entirely. The formula prices an umbrella the same on a sunny Tuesday as on a wet Friday. Every unit of pricing power you have is invisible to it.

It anchors your price to your inefficiency. If your costs are 20% above a competitor's, a fixed markup hands you a price 20% above theirs. Cost-plus quietly passes your operational problems to the customer, until the customer leaves.

It rewards cost inflation. A percentage markup on a rising cost base grows your cash profit automatically, which removes the pressure to fix the cost base.

It is circular on volume-sensitive costs. Unit cost depends on volume, volume depends on price, and price depends on unit cost. Businesses with heavy fixed costs discover the loop the hard way.

It says nothing about what the customer values. The costliest thing you make is not always the thing worth the most. Software is the extreme case: near-zero marginal cost makes a markup on cost meaningless, which is why nobody prices software this way.

Markup is the only one of the four that is a pricing input. The other three are outcomes you read after the fact. That is the useful way to hold them: you set markup, and you measure margin.

Subtract the cost from the sale price to get the profit, divide that by the cost, and multiply by 100. A product that costs $40 and sells for $50 has a profit of $10, so the markup is $10 ÷ $40 × 100 = 25%.

Markup divides profit by cost. Margin divides profit by the sale price. The same $10 of profit on a $40 cost and a $50 price is a 25% markup and a 20% margin. Margin is always the smaller number, and it can never exceed 100%, while markup has no upper limit.

You sell the item for double what it cost you. Profit equals cost, so cost is exactly half of the sale price, which is a 50% margin. Retailers call this keystone pricing.

Divide the margin by one minus the margin. A 40% margin becomes 0.40 ÷ 0.60 = 0.667, or a 66.7% markup. Going the other way, divide the markup by one plus the markup: a 66.7% markup is 0.667 ÷ 1.667 = 40%.

There is no universal answer, because it depends entirely on what sits below your gross profit line. The useful test is to work backwards: total your operating costs, add the profit you want, and find the markup that covers both at your realistic sales volume. Copying a sector convention without doing that arithmetic is how businesses price themselves into a loss.

Yes, and often is. Markup is limited only by what customers will pay, so a $2 cost sold at $20 is a 900% markup. Margin is the metric with a ceiling, because profit can never be larger than the price.

Multiply the cost by one plus the markup expressed as a decimal. A $60 cost with a 45% markup gives $60 × 1.45 = $87. Enter the cost and the markup in the calculator above and it returns the price directly.