Markup calculator
Markup is what you add to the cost of something to set its price, written as a percentage of the cost. Enter what an item costs you and what you sell it for to see the markup, the margin and the profit on each sale, or enter a cost and the markup you want to get the price.
Markup and margin from cost and price
Selling price from a target markup
Markup and margin describe the same profit from opposite ends, which is why they're so often mixed up: a 50% markup is a 33.3% margin. The gross margin calculator works the other way round, from a target margin.
How to calculate markup
Take the selling price, subtract the cost, divide by the cost and multiply by 100:
Markup % = (price − cost) ÷ cost × 100
An item that costs £40 and sells for £60 makes £20 profit, and £20 is half of £40, so the markup is 50%. To go the other way and set a price from a markup, multiply the cost by one plus the markup: £40 × 1.5 = £60.
The figures to use are per unit and excluding VAT. VAT you charge isn't your money: in the UK you pass it on to HMRC, so leaving it in makes every markup look bigger than it is.
Markup vs margin
Both start from the same profit. Markup divides it by the cost; margin divides it by the price. Because the price is always bigger than the cost, the margin is always the smaller number.
| Markup | Margin |
|---|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
| 200% | 66.7% |
To convert, margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin), with both as decimals. Sales teams tend to talk in markup and accountants in margin, so agree which one a target means before anyone sets prices from it. Your profit and loss reports margin.
Worked example
A fictional 40-person plumbing merchant buys a valve for £18 and sells it for £27. The markup is (27 − 18) ÷ 18 = 50%, and the margin is 9 ÷ 27 = 33.3%.
The finance director wants a 40% gross margin on fittings. A 40% margin needs a 66.7% markup (0.4 ÷ 0.6), so the valve should sell for £18 × 1.667 = £30. Putting £30 into the calculator with an £18 cost confirms it: £12 profit, a 66.7% markup and a 40% margin. Before changing the price list, the team checks what the higher price does to sales volume with the price increase calculator.
What counts as cost
Use the full cost of getting one unit ready to sell, sometimes called the landed cost:
- the purchase price after any supplier discounts;
- delivery to you, import duty and any customs charges;
- packaging and labelling that goes out with the product;
- for things you make, the materials and the direct labour time.
Leave out overheads such as rent, salaries and software. Those are what the markup has to pay for, and they belong in a break-even sum rather than in the cost of each unit.
Common mistakes
- Treating a markup target as a margin target. A buyer told to "make 40%" who adds 40% to cost ends up on a 28.6% margin.
- Working from prices that include VAT. The VAT inflates the price and the markup with it.
- Forgetting discounts and card fees. A 10% trade discount on a 50% markup leaves a 35% markup.
- One markup for everything. Slow-moving or bulky stock costs more to hold, so it usually needs more.
- Using an old cost. Re-run the sums when a supplier raises prices, not at the year end.
Frequently asked questions
Is markup the same as margin?
No. Markup is profit as a share of the cost; margin is profit as a share of the selling price. The same £20 profit on a £40 item sold for £60 is a 50% markup and a 33.3% margin.
How do I work out a selling price from a markup?
Multiply the cost by one plus the markup as a decimal. A £40 cost with a 25% markup gives £40 × 1.25 = £50.
What markup should I use?
There's no single right figure. Work back from the margin your overheads and profit target need, convert it to a markup, then check the price against what customers will pay and what competitors charge.
Should markup include VAT?
No. Work on prices and costs without VAT. If you're VAT registered, the VAT you charge goes to HMRC and the VAT you pay on stock is usually reclaimed, so neither is part of your profit.