Understanding how to calculate markup percentage is essential for anyone in retail, eCommerce, or any type of business that sells products or services. Markup percentage determines the selling price above the cost price, helping businesses ensure profitability.
In this article, you'll learn what markup is, the difference between markup and margin, and exactly how to calculate markup percentage with examples and a formula you can use anytime.
➕ What is Markup?
Markup is the amount added to the cost price of a product to determine its selling price. It represents how much profit you make on a product after covering its original cost.
For example, if a product costs $50 to produce and you sell it for $75, your markup is $25.
🆚 Markup vs. Margin: What’s the Difference?
Though often used interchangeably, markup and margin are not the same:
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Markup is based on cost.
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Margin is based on revenue (selling price).
Formula for Markup:
Markup (%) = (Selling Price - Cost Price) / Cost Price × 100
Formula for Margin:
Margin (%) = (Selling Price - Cost Price) / Selling Price × 100
Understanding this difference is crucial when pricing your products accurately.
🧮 How to Calculate Markup Percentage: Step-by-Step
Let’s break down how to calculate markup percentage using the formula:
✅ Markup Percentage Formula:
Markup (%) = [(Selling Price - Cost Price) / Cost Price] × 100
📌 Example:
Let’s say you’re selling a custom coffee mug:
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Cost Price: $10
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Selling Price: $15
Now plug those into the formula:
Markup (%) = [(15 - 10) / 10] × 100 = (5 / 10) × 100 = 50%
That means your markup percentage is 50%.
🧠 Why Markup Percentage Matters
Calculating the right markup percentage ensures:
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📈 Healthy Profit Margins
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⚖️ Competitive Pricing
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💰 Sustainable Business Growth
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📊 Better Financial Forecasting
By using the markup formula, you can maintain profitability while staying competitive in your industry.
🧾 Markup Percentage Calculator (Bonus Tip!)
Want to speed things up? Use a simple formula in Excel or Google Sheets:
Or use online markup calculators to automate the math.
🚫 Common Mistakes to Avoid
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❌ Confusing markup with margin
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❌ Using inconsistent cost figures (e.g., not including shipping or labor)
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❌ Ignoring market trends or competitor pricing
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❌ Forgetting to update your pricing when costs change
Being precise with your markup calculation helps you avoid underpricing or overpricing.
🎯 Final Thoughts: Mastering Markup for Smart Pricing
Knowing how to calculate markup percentage is one of the most valuable skills for entrepreneurs, retailers, and freelancers. It ensures you’re pricing your offerings in a way that covers your costs and grows your bottom line.
Stick to the formula, avoid common pitfalls, and regularly review your pricing strategy. You'll thank yourself later.