Util Tools What is markup?
Markup is how much you add to the cost of a product to set its selling price, expressed as a percentage of the cost. The formula is markup % = ((price - cost) / cost) * 100. If an item costs $40 and sells for $60, the markup is $20 / $40 = 50%. This calculator finds markup from cost and price, or the selling price needed to hit any target markup.
Markup vs. margin: the crucial difference
Markup and margin describe the same profit but against different bases, and confusing them is a classic pricing mistake. Markup is profit as a percentage of cost; margin is the same profit as a percentage of the selling price. Because the price is larger than the cost, a given markup always produces a smaller margin number. A 50% markup on a $40 cost gives a $60 price, but the margin is only $20 / $60 = 33%.
Keystone pricing and retail norms
Keystone pricing is the traditional retail rule of doubling the cost, which is a 100% markup (and a 50% margin). It is a simple starting point, but real markups vary widely by industry: groceries run on thin markups and high volume, while jewellery, apparel, and specialty goods often carry much higher markups to cover overhead, returns, and slow-moving stock.
Setting the right markup
A sound markup has to cover not just the product cost but all your other expenses (rent, staff, shipping, payment fees, returns) and still leave profit. Work backward from the margin you need to survive, then check that the resulting price is competitive. Pricing too low to "win" sales is the fastest route to an unprofitable business.
Last updated: July 2026