Price from what it costs you, not from thin air
Markup is the oldest pricing method there is: work out what something costs you, add a percentage, and that is the price. Retailers, tradespeople, manufacturers and Etsy sellers use it every day. It is simple, defensible and fast — as long as you apply it to the right base.
The trap is confusing markup with margin. A 50% markup does not give you a 50% profit margin. It gives you 33.3%. Businesses that price “at 40% margin” but calculate it on cost are quietly donating 24% of their profit to their customers. This calculator computes markup, converts it to margin (and back), and shows the formulas so the difference sticks.
How to use it
- Enter your unit cost: what the item costs you to buy or make (materials, wholesale price, direct labour).
- Enter your markup percentage, or enter your target selling price and let the tool derive the markup.
- Read the selling price, the profit per unit, the markup % and the equivalent margin %.
- Use the converter row to flip between markup and margin in either direction.
What it calculates and how the formulas work
| Measure | Formula |
|---|---|
| Selling price from markup | Cost × (1 + markup as decimal) |
| Markup % | ((Selling price − cost) ÷ cost) × 100 |
| Margin % (equivalent) | ((Selling price − cost) ÷ selling price) × 100 |
| Markup from a target margin | Margin ÷ (1 − margin), as a decimal |
The conversion pair that matters:
- Markup 50% → margin 33.3%
- Margin 50% → markup 100%
Assumptions:
- “Cost” means your fully loaded unit cost — materials plus the direct labour and delivery attributable to the unit. Marking up an understated cost just bakes the error into every sale.
- The tool computes per-unit pricing. Overhead (rent, salaries, marketing) is not in the unit cost; check with the break-even calculator that your volumes cover it.
- Tax is excluded from these figures. Add VAT/GST/sales tax on top of the marked-up price (or confirm whether your market quotes tax-inclusive).
Worked example: the boutique that priced itself poor
Lena runs a small homeware boutique. A ceramic vase costs her £28 wholesale (including delivery). She wants a “50% margin” and prices it at £42 — cost plus 50%.
The calculator shows her mistake instantly:
- Markup: (£42 − £28) ÷ £28 = 50% ✓ (what she calculated)
- Margin: (£42 − £28) ÷ £42 = 33.3% ✗ (what she actually got)
To achieve a true 50% margin she needs: £28 ÷ (1 − 0.50) = £56. At £42 she was giving away £14 of profit per vase. Across 200 vases a month, that is £2,800 a month in vanished profit — found in thirty seconds with the converter row.
Important considerations and limitations
- Markup ignores what customers will pay. Cost-plus pricing guarantees you cover costs, not that the price is right. If the market supports more than your markup gives, you are leaving money on the table; if it supports less, no markup formula will save you.
- Include all unit costs. The classic error is marking up the wholesale price while forgetting delivery, packaging, payment fees and breakage. List every per-unit cost first.
- Volume matters. A 30% markup at high volume can beat a 60% markup at low volume. Pair this tool with the break-even calculator to check the full picture.
- Check margin, not just markup. Suppliers, lenders and buyers think in margin. Always know both numbers for any price you set.
- Browser-local: your cost and pricing data never leaves your browser.
Frequently asked questions
How do I calculate markup on cost?
Subtract cost from selling price, divide by cost, multiply by 100. A £28 cost sold at £42 = (£42 − £28) ÷ £28 = 50% markup.
What is the difference between markup and margin?
Markup is profit as a percentage of cost; margin is profit as a percentage of selling price. £28 cost, £42 price: 50% markup, 33.3% margin. Same profit (£14), different base — and the base is everything.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup → 0.50 ÷ 1.50 = 33.3% margin. The calculator’s converter row does this both ways.
What is a good markup percentage?
Retail commonly uses 50–100% (keystone pricing is 100%: double the wholesale cost). Trades often mark up materials 10–30% on top of labour charges. Food service varies wildly by item. There is no universal “good” — it must cover your overhead and hit your target margin.
Should I use markup or margin to set prices?
Use markup to build the price from cost (simple, fast), then check the resulting margin to make sure the business works. Professionals quote margin; the calculator shows you both.
Does markup include VAT or sales tax?
No — calculate your marked-up price first, then add tax on top (or confirm your market’s convention; UK consumer prices are usually shown VAT-inclusive, US prices tax-exclusive).
Is my pricing data uploaded anywhere?
No. All calculations run locally in your browser.
Related tools
External references
- SBA — Plan your business (includes cost structure guidance)
- GOV.UK — Keeping business records
- IRS — Recordkeeping for small businesses
This tool provides estimates for guidance only and is not professional financial, tax, or legal advice.