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 has to cover rent, wages, card fees, shrinkage, and markdowns before anything is left as net profit.
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.
How markup conventions differ by industry
There is no standard markup, even within one industry; what you need depends on your overhead and volume (see the next section). What does differ by industry is how markup is expressed and where it is applied, and those conventions are worth knowing before you compare your numbers with anyone else's.
| Industry | How pricing is usually quoted | What to watch |
|---|---|---|
| Independent retail | Markup on wholesale cost, with keystone (100%) as the reference point | Markdowns and shrinkage come out of the margin later |
| Restaurants | Food cost percentage (cost ÷ menu price), which is a margin-style figure | A "30% food cost" is a 233% markup, not 30% |
| Contractors and trades | Separate markups on materials, subcontractors, and own labour | Labour markup must cover the employer costs on top of wages |
| Wholesale and distribution | Small markups on high volume, often quoted to retailers as "margin points" | A few points of discount can erase the profit on an order |
| Professional services | Hourly or project rate rather than a markup on cost | The real cost is your loaded labour rate plus unbillable time |
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. Drinks usually carry higher markups than food because they need little preparation labour.
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 all have to be recovered before any profit. Add those costs up for your own crew and divide by the hours you actually bill; the payroll calculator shows the employer taxes on any wage. 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.
What the calculator assumes
- One item or one job at a time. To find the markup across a whole product range, add up total cost and total sales first and enter those.
- Cost means direct cost. Enter what you pay for the goods or the direct labour and materials for the job. Overhead is covered by choosing a big enough markup, not by adding it to cost.
- Cost must be above $0. Markup is a percentage of cost, so it cannot be calculated on a free item.
- Prices exclude sales tax. Add sales tax on top of the selling price the calculator gives you.
- Rounding. Prices and costs are rounded to the cent; percentages are shown to two decimal places.
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.