The markup formula
Selling price = Cost × (1 + Markup %). With a $40 cost and a 50% markup: $40 × 1.5 = $60, a profit of $20.
Markup % = (Price − Cost) ÷ Cost × 100. Selling a $40 item for $60 is a ($60 − $40) ÷ $40 = 50% markup.
Markup vs margin
Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. The same $20 profit on a $60 sale is a 50% markup but only a 33.3% margin. Confusing the two is one of the most common pricing mistakes – a business that "adds 30%" thinking it earns a 30% margin really earns 23%.
| Markup | Margin | Markup | Margin |
|---|---|---|---|
| 10% | 9.1% | 60% | 37.5% |
| 20% | 16.7% | 75% | 42.9% |
| 25% | 20% | 100% | 50% |
| 30% | 23.1% | 150% | 60% |
| 50% | 33.3% | 200% | 66.7% |
To hit a target margin, use Price = Cost ÷ (1 − Margin %) – choose "Cost and target margin" above. For the margin side of the picture, see the profit margin calculator.
Typical markups
- Contractors and trades: often 15–30% on materials, plus labor at a full hourly rate
- Retail: 50–100% (keystone pricing is 100% – doubling the cost)
- Restaurants: food often 200–300% on ingredient cost
- Services: price from your hourly rate rather than a markup
Once you have your prices, put them on an estimate or quote.
Frequently asked questions
What is a 30% markup on $100?
$100 × 1.30 = $130. The profit is $30, which is a 30% markup but a 23.1% margin.
How do I convert markup to margin?
Margin = Markup ÷ (1 + Markup). A 50% markup is 0.5 ÷ 1.5 = 33.3% margin. To go the other way: Markup = Margin ÷ (1 − Margin).
Should my cost include labor?
Include the direct costs of the item or job – materials, direct labor and delivery. Overheads such as rent and software are usually covered by your markup.
Is a higher markup always better?
Not if it prices you out of the market. Compare with competitors and check your break-even point with the break-even calculator.
