How to use this markup calculator
Choose what you need to solve for, then enter two numbers:
- Selling price from cost and markup. Enter what the item costs you and the markup you want to apply. You get the price, the dollar profit, and the profit margin that markup actually produces.
- Markup from cost and price. Enter your cost and the price you are charging (or a competitor is charging). You get the markup and margin percentages side by side.
- Maximum cost from price and markup. Enter the price the market will bear and the markup you need. The tool tells you the most you can pay a supplier or spend on the job.
- Markup needed for a target margin. Enter your cost and the gross margin you want (for example, the 40% your accountant quoted). You get the markup to apply and the selling price it produces.
Open the conversion table under the results to see how each common markup translates into a margin.
The markup formula
Markup expresses profit as a percentage of what you paid:
Markup (%) = (Selling price − Cost) ÷ Cost × 100
To go from cost to price, multiply by one plus the markup:
Selling price = Cost × (1 + Markup)
A hardware store buys a drill for $60 and applies a 50% markup: $60 × 1.50 = $90. Profit is $30. To work backwards from a price, divide instead: a $150 retail item that must carry a 50% markup can cost at most $150 ÷ 1.50 = $100.
Markup vs. margin
Markup and margin describe the same $30 of profit on that drill, but against different bases. Markup divides by cost ($30 ÷ $60 = 50%). Margin divides by price ($30 ÷ $90 = 33.3%). Because price is always bigger than cost on a profitable sale, markup is always the bigger percentage.
The two convert with a pair of simple formulas:
Margin = Markup ÷ (1 + Markup) Markup = Margin ÷ (1 − Margin)
| Markup | Margin | $100 cost sells for |
|---|---|---|
| 10% | 9.1% | $110 |
| 20% | 16.7% | $120 |
| 25% | 20.0% | $125 |
| 30% | 23.1% | $130 |
| 40% | 28.6% | $140 |
| 50% | 33.3% | $150 |
| 60% | 37.5% | $160 |
| 75% | 42.9% | $175 |
| 100% | 50.0% | $200 |
| 150% | 60.0% | $250 |
| 200% | 66.7% | $300 |
| 300% | 75.0% | $400 |
The most expensive mistake in small-business pricing is applying a markup when you meant a margin. If your accountant says the business needs a 40% gross margin and you mark everything up 40%, you actually earn a 28.6% margin. On $400,000 of annual cost of goods, that is $560,000 of revenue instead of $666,667, a shortfall of more than $106,000. Use this page when you are working from cost; use the profit margin calculator when you are working from price or reading a financial statement.
Keystone pricing
"Keystone" is retail shorthand for a 100% markup: sell at double the wholesale cost. A boutique that buys a jacket for $45 keystones it to $90. The resulting 50% gross margin is roughly what an independent shop needs to cover rent, wages, card fees, shrinkage, and markdowns and still keep a net profit in the single digits.
Keystone is a starting point, not a rule. Fast-moving, price-transparent goods (electronics, branded consumables) rarely sustain it, and slower categories with high service needs (fine jewellery, furniture, eyewear) often exceed it. Many retailers keystone their assortment and then adjust individual lines by comparing them against competitors.
Typical markups by industry
These are common ranges for U.S. small businesses. Use them to check whether you are in the right neighbourhood, then set your own number based on your overhead (see the next section).
| Industry | Typical markup on cost | Equivalent margin |
|---|---|---|
| Grocery and convenience | 10% – 30% | 9% – 23% |
| Wholesale and distribution | 15% – 30% | 13% – 23% |
| Independent retail (apparel, gifts) | 80% – 120% (keystone) | 44% – 55% |
| Jewellery | 100% – 300% | 50% – 75% |
| Restaurants, food | 200% – 300% (25% – 33% food cost) | 67% – 75% |
| Restaurants, drinks and bar | 300% – 500% | 75% – 83% |
| Contractors, materials | 10% – 25% | 9% – 20% |
| Contractors, subcontractor labour | 15% – 30% | 13% – 23% |
| Contractors, own crew labour | 25% – 50%+ | 20% – 33%+ |
| Auto repair parts | 30% – 100% | 23% – 50% |
Restaurants talk in "food cost percentage" rather than markup. A 30% food cost target means the plate price is cost ÷ 0.30, which is a 233% markup. A dish costing $4.50 in ingredients would be priced at $15. Beverages carry far higher markups because they need little labour and the customer already has a price reference in mind.
Contractors usually apply different markups to materials, subcontractors, and their own labour, then quote a single price. Materials markup is thin because customers can look prices up. Labour markup is heavy because the hourly wage is only part of the true cost: payroll taxes, workers' compensation, liability insurance, tools, trucks, and unbillable hours between jobs can add 30–60% on top of wages before any profit. If you send estimates or quotes, build these markups into your unit rates rather than adding a single line the customer can negotiate away.
Wholesalers operate on low markups but high volume, and often quote "margin points" to retailers. If a distributor sells at a 20% markup and the retailer keystones, the manufacturer's $10 item reaches the shelf at $24.
How to set a markup that covers overhead
Industry tables tell you what other people charge, not what you need. To calculate the markup your own business requires, work from your overhead and your expected volume:
- Add up annual overhead. Everything that is not a direct cost of the goods or jobs you sell: rent, utilities, insurance, software, admin wages, marketing, vehicle costs, your own salary if you are not billing it as labour.
- Estimate annual cost of goods (or direct job costs). Use last year's figures from your profit and loss statement or a realistic forecast.
- Decide the net profit you want in dollars, after overhead and after paying yourself.
- Compute the break-even markup.
Required markup = (Overhead + Target profit) ÷ Cost of goods × 100
For example, a landscaping company expects $300,000 of direct costs (crew wages, plants, mulch, fuel) next year, has $90,000 of overhead, and wants $45,000 of profit. Required markup = ($90,000 + $45,000) ÷ $300,000 = 45%. Every job should be priced at direct cost × 1.45, which gives a 31% gross margin. If the owner instead copies a "20% markup" tip from a forum, the business earns $60,000 gross profit against $90,000 of overhead and loses $30,000.
Two refinements matter in practice:
- Volume is the variable that bites. Overhead is fixed; if sales fall 20%, the same markup no longer covers it. Rerun the numbers each quarter.
- Discounting attacks margin, not markup. A 10% discount on a 45% markup job cuts your gross margin from 31% to 23% of the new price: on $100 of cost, profit falls from $45 to $30.50, nearly a third of your profit gone for a tenth off. Price the invoice from your required markup and negotiate scope, not percentages.
Worked examples
Retail. A gift shop buys candles at $8.40 each and wants keystone pricing. Price = $8.40 × 2 = $16.80. Profit per candle is $8.40, margin 50%. A competitor sells a similar candle for $14.99; matching them would be a 78% markup and a 44% margin. The owner can check whether a 44% margin still covers overhead before deciding.
Trades. An electrician buys a panel for $620 and expects 6 hours of labour at a $38 loaded wage ($228). She marks up materials 15% ($713) and labour 45% ($330.60). The quote is $1,043.60, a blended markup of 23% on her $848 of direct cost and a 19% gross margin. If her overhead calculation says she needs 30% blended, she raises the labour markup rather than the parts.
Working backwards. A café wants to sell a sandwich for $12 and hold food cost at 30%. Maximum ingredient cost = $12 ÷ (1 + 2.333) = $3.60. If the recipe costs $4.10 today, the café either raises the price to $13.67, trims the recipe by 50 cents, or accepts a 34% food cost on that item and makes it up elsewhere on the menu.
Run any of these through the calculator above and switch modes to see how price, cost, markup, and margin move together.