Markup Formula: The Complete
Pricing & Markup Guide
Master the markup formula, markup vs margin conversion, and how to set selling price from cost for ecommerce.
The Markup Formula
Selling Price = Cost × (1 + Markup ÷ 100)
The price you charge. Must be greater than cost for positive markup.
Your cost of goods (COGS) or total cost to acquire/produce the product.
Percentage added to cost. Convert to margin for profit analysis.
Quick Example
Product cost: $40. Selling price: $100.
Markup = (($100 - $40) ÷ $40) × 100 = 150%
Margin = $60 ÷ $100 = 60%. Markup is always higher than margin for the same profit.
Know Your Margins at a Glance
StoreRadar calculates gross margin for every product so you can see the real profit impact of your markup and discounts.
Markup Formula Variations
Calculate markup, price, and margin
The standard markup formula. Result is a percentage.
Multiply cost by (1 + decimal markup).
Use decimal form of markup (66.7% = 0.667).
Essential when you have a margin target.
Useful for reverse-engineering competitor pricing.
Markup vs Margin Conversion Table
Same profit, different denominators
| Markup | Margin | Example ($100 cost) |
|---|---|---|
| 25% | 20% | $100 cost → $125 price |
| 50% | 33.3% | $100 cost → $150 price |
| 100% | 50% | $100 cost → $200 price |
| 150% | 60% | $100 cost → $250 price |
| 200% | 66.7% | $100 cost → $300 price |
Worked Examples
Step-by-step markup and pricing calculations
Basic Markup Calculation
A product costs you $35 and you sell it for $79.
- 1 Cost = $35, Selling Price = $79
- 2 Markup % = (($79 - $35) ÷ $35) × 100
- 3 Markup % = ($44 ÷ $35) × 100
- 4 Markup = 125.7%
Your markup is 125.7%.
You're adding 125.7% of the cost as profit. Margin = 44 ÷ 79 = 55.7%.
Setting Price from Cost and Target Markup
Cost is $42. You want a 80% markup.
- 1 Cost = $42, Markup = 80% = 0.80
- 2 Selling Price = $42 × (1 + 0.80)
- 3 Selling Price = $42 × 1.80 = $75.60
- 4 Verify: ($75.60 - $42) ÷ $42 = 80% ✓
Price at $75.60 to achieve 80% markup.
Your margin at this price is 80% ÷ 1.80 = 44.4%.
Converting Target Margin to Markup
You need 45% gross margin. Product cost is $28. What price and markup?
- 1 Margin = 45% = 0.45
- 2 Markup = 0.45 ÷ (1 - 0.45) = 0.45 ÷ 0.55 = 0.818 (81.8%)
- 3 Selling Price = $28 ÷ (1 - 0.45) = $28 ÷ 0.55 = $50.91
- 4 Or: $28 × (1 + 0.818) = $50.91
Price at $50.91 for 45% margin; that's 81.8% markup.
A 45% margin requires 81.8% markup—not 45% markup (which would only give ~31% margin).
Markup vs Margin Table (Same Profit)
Cost $100. Compare 50% vs 100% markup.
- 1 50% markup: Price = $150, Profit = $50, Margin = 33.3%
- 2 100% markup: Price = $200, Profit = $100, Margin = 50%
- 3 Doubling markup does not double margin
- 4 To get 50% margin you need 100% markup
Higher markup gives higher margin, but the relationship is non-linear.
Use the conversion formulas so you don't set a 'margin' target and accidentally use it as markup.
Common Markup Mistakes
Errors that lead to wrong prices and margins
Confusing Markup with Margin
Setting a 50% 'margin' by adding 50% to cost. That gives 33.3% margin, not 50%.
For 50% margin use: Price = Cost ÷ (1 - 0.50) = 2× cost (100% markup).
Using One Markup for All Products
Applying the same markup across categories with different costs and price sensitivity.
Segment by category and competition. Premium products can sustain higher markup; commodities need lower.
Ignoring Operating Costs
Markup only covers COGS. If overhead and marketing eat 30%, a 40% margin may be too low.
Target gross margin that leaves room for operating expenses and net profit.
Forgetting Discounts
Pricing at 80% markup but often selling at 20% off—effective margin drops significantly.
Calculate effective margin after typical discounts and promotions.
Related Formulas
Metrics that connect to markup and pricing
| Formula | Calculation | Relationship |
|---|---|---|
| Gross Margin | ((Revenue - COGS) ÷ Revenue) × 100 | Margin is profit as % of price; use with markup for full picture |
| Selling Price from Margin | Cost ÷ (1 - Margin) | When you have a margin target instead of markup |
| Break-Even ROAS | 1 ÷ Gross Margin | Margin (from markup) determines ad profitability |
| COGS | Sum of direct product costs | Markup is applied on top of COGS |
| Discount | ((Original - Sale Price) ÷ Original) × 100 | Discounts reduce effective margin; plan markup accordingly |
Frequently Asked Questions
Common questions about markup and pricing
The markup formula is: Markup % = ((Selling Price - Cost) ÷ Cost) × 100. To get selling price from cost: Selling Price = Cost × (1 + Markup ÷ 100). For example, $50 cost with 100% markup: $50 × 2 = $100 selling price.
Markup is profit as a percentage of cost; margin is profit as a percentage of selling price. A 100% markup means you double the cost ($50 → $100), which is a 50% margin. Margin = Markup ÷ (1 + Markup). Markup is always higher than margin for the same profit.
Use: Margin = Markup ÷ (1 + Markup). For 100% markup (1.0): 1.0 ÷ 2.0 = 50% margin. For 50% markup (0.50): 0.50 ÷ 1.50 = 33.3% margin. To convert margin to markup: Markup = Margin ÷ (1 - Margin).
It varies by category: apparel often 100–200% markup (50–67% margin), electronics 30–50% markup, jewelry/luxury 200–400%. Your markup must cover COGS, operating expenses, and desired profit. Use margin to check you're not underpricing.
Markup is intuitive for cost-plus pricing: add X% to cost. Margin is better for profit analysis and break-even. Many retailers set prices using markup but monitor margin. Know both—confusing them leads to underpricing (e.g. thinking 50% markup gives 50% margin; it gives 33.3%).
Selling Price = Cost ÷ (1 - Margin). For 40% margin and $60 cost: $60 ÷ 0.60 = $100. That's equivalent to 66.7% markup. Use this when you have a margin target rather than a markup target.
Track Margins Across Every Product
StoreRadar calculates gross margin for every SKU so you can see the real impact of your markup and discounts.
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