Markup: pricing's simplest tool
Markup answers the shop-floor question: "I paid $60 for it — what do I charge?" Add your markup percentage to the cost. A 40% markup on $60 means $24 of markup and an $84 selling price. Retail, wholesale and contracting all run on markup because it is fast and needs only the cost — but it hides the number owners actually live on, the margin, which this calculator always shows alongside.
The markup formula
And the margin that price produces: Margin = Markup ÷ (1 + Markup). So a 40% markup yields a 28.57% margin; a 100% markup ("keystone" pricing, common in retail) yields a 50% margin. The two scales converge at low percentages and diverge wildly at high ones.
Choosing your markup
- Keystone (100%) — double the cost; the retail default for many categories.
- Cost-plus contracting: 10–25% markups are common where labor and materials are billed transparently.
- High-turnover goods (groceries, fuel) survive on single-digit markups because volume compensates.
- Whatever the market bears: markup is a starting framework — competitors' prices and customers' alternatives set the ceiling.
If you think in margins instead (most accountants do), use the Margin Calculator, and convert between the two languages with the Margin vs Markup Calculator.
Why a 40% markup is not a 40% margin
Markup is measured on cost; margin is measured on price — so the same transaction carries two different percentages, and mixing them up quietly under-prices everything you sell. On an item that costs $60:
| Markup on cost | Selling price | Gross margin |
|---|---|---|
| 25% | $75.00 | 20.0% |
| 33.3% | $80.00 | 25.0% |
| 50% | $90.00 | 33.3% |
| 100% | $120.00 | 50.0% |
The pattern to remember: margin is always the smaller number, and a 100% markup (“keystone” pricing, common in retail) is only a 50% margin. If your accountant talks margin and your supplier talks markup, convert with the Margin vs Markup Calculator before setting prices.
Worked example
Cost $60 with a 40% markup: price = $60 × 1.40 = $84, profit $24 per unit. Many sellers believe this gives them a “40% margin” — it actually gives 28.57%. If the business plan needs a true 40% margin, the required markup is 66.67% and the price $100.
How to use this calculator
- Enter the full per-unit cost.
- Enter the markup percentage you want to apply.
- Read the selling price — and check the equivalent margin before committing to it.
- Adjust the markup until both the price (customers) and the margin (your business) make sense.
Markup on materials vs labor
Contractors often apply different markups to materials and labor, or bill labor at a loaded rate (wages + taxes + insurance + overhead) with a smaller markup on top. However you structure it, run the final price through the margin view: if the blended margin cannot cover your overheads at realistic volumes, the job loses money at any speed.