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Markup

How to calculate markup percentage on cost

The percent on top of cost, not the percent of revenue — and the two are not the same.

Markup describes the gap between cost and selling price as a percentage of cost. Where margin asks "of every dollar we collect, how much is profit?", markup asks "for every dollar we spend on the product, how much is profit?". The two answers describe the same sale from different angles, but the percentages are different numbers and substituting one for the other is the most common pricing mistake in small business.

This page uses a $40 cost sold for $64 — a 60% markup that is only a 37.5% margin — to make the distinction concrete.

The markup percentage formula

Markup compares profit to cost. With a cost of $40 sold for $64 (a profit of $24):

markup% = (selling price − cost) ÷ cost × 100% = ($24 ÷ $40) × 100% = 60%

Markup and margin describe the same sale from different angles. The same $40 cost sold for $64 can be quoted as a 60% markup on cost or a smaller percentage as a margin on revenue.

Markup vs margin in a single table

MarkupEquivalent margin
25%20.0%
50%33.3%
60%37.5%
100%50.0%
150%60.0%
200%66.7%

Markup is always larger than margin for the same sale, because cost is always smaller than revenue. Confusing the two understates either profit or pricing power, depending on which way the substitution went.

The practical lesson: pick one term per conversation and stick with it. Pricing teams typically work in markup because they start from cost; finance teams typically work in margin because they start from revenue. Translate between the two using the conversion formula in the FAQ below whenever the conversation crosses the bridge.

Common mistakes to avoid

  • Calling margin "markup" or vice versa. Margin divides by revenue; markup divides by cost.
  • Comparing APR and APY directly without normalising for compounding frequency.
  • Booking commission on invoiced sales but forgetting the clawback when revenue is refunded.
  • Averaging percent growth across periods rather than recomputing from the underlying values.

Calculation tips & best practices

  • Define numerator and denominator explicitly before reporting any business percent.
  • Document the date range; a percent comparison without a date window is decoration, not data.
  • Treat published rates as a starting point; fees, taxes and timing change the realised number.
  • Always confirm material financial figures with a qualified adviser.

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Note: Percentage results are estimates for informational use only. Always verify critical financial, tax, or business calculations with a qualified professional.

Calculate markup vs margin together

Use the calculator in Basic mode to test both formulas back-to-back: divide profit by cost for markup, then by selling price for margin. The two numbers differ — meaningfully.

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