Markup is the classic cost-plus way to price: add a percentage to what you paid and sell at the result. It's simple to apply across a catalog, but getting the percentage right — and knowing the difference between markup and margin — is what separates profitable pricing from guesswork.
Cost-plus pricing in practice
The formula is price = cost × (1 + markup). It's popular because it's transparent and easy to update when costs change. The risk is that it starts from your costs rather than what the market will bear, so it's best combined with a check against competitor prices.
Markup, margin and why the distinction matters
Markup is measured against cost; margin against price. They only coincide numerically in edge cases, and mistaking one for the other leads to systematically under-priced goods. Once you know your target margin, convert it to a markup before applying it to costs.
Choosing a markup that works
Your markup must cover not just the goods' cost but also overheads, marketing, and your profit target. Work backwards from the margin you need and the volume you expect, then stress-test the resulting price against the market before committing.
Frequently asked questions
Markup = (selling price − cost) ÷ cost × 100. You can also set price directly: price = cost × (1 + markup). A 50% markup on $50 cost is a $75 price.
Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A 50% markup equals a 33.3% margin.
Use the formula markup = margin ÷ (1 − margin). If you want a 40% margin, the equivalent markup is 0.4 ÷ 0.6 = 66.7%.