Business
Markup Calculator
Works markup and the margin it actually produces, which are different numbers.
Result
Cost should be fully loaded. If your cost figure excludes overhead, the margin shown is gross and your real net margin is lower.
Get a Free Business AuditHow the calculation works
Markup is the amount added to cost, expressed as a percentage of that cost. Margin is the same dollar amount expressed as a percentage of the selling price, which makes it always the smaller of the two. Both are shown because applying a markup in the belief it produces the matching margin is the most common pricing error there is.
What moves the number
- Cost base the markup is applied to.
- Target margin, which is what the business needs.
- Whether the cost base includes all direct costs.
- Consistency across the price list.
Where this one goes wrong
A 50% markup is a 33.3% margin, and a 100% markup is a 50% margin, which means a business applying markups while planning around margins is short by a predictable amount on every single transaction. To price to a target margin, divide cost by one minus the margin. The other error is an incomplete cost base, since a markup applied to a cost that omits freight, waste or labour burden recovers less than it appears to.
Before you quote
- Price to margin by dividing cost by one minus the margin.
- Check the resulting margin whenever applying a markup.
- Make sure the cost base includes every direct cost.
Questions
About this calculator
Is a 50% markup a 50% margin?
No, it is a 33.3% margin. Markup is measured against cost and margin against price, so markup is always the larger figure. A business applying markups while planning around margins is short by a predictable amount on every transaction.
How do I price to a target margin?
Divide cost by one minus the margin. For a 40% margin, cost divided by 0.6. Adding 40% to cost produces a 28.6% margin instead, and that shortfall applies to every item priced the same way.
What belongs in the cost base?
Every direct cost: purchase price, freight, waste or breakage, and the burdened labour if labour is direct. A markup on an incomplete cost base recovers less than it appears to, and the gap is invisible until the margins are measured.
The formula
price = cost × (1 + markup); margin = markup ÷ (1 + markup)
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How to use this calculator
- Cost ($). Enter your own figure; the page starts at $1,200.
- Markup on cost (%). Enter your own figure; the page starts at 45%.
The result updates as you type, so you can try a figure, see what it does to selling price, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Cost | $1,200 |
| Markup on cost | 45% |
What comes out
| Result | Value |
|---|---|
| Selling price main result | $1,740.00 |
| Profit | $540.00 |
| Resulting margin | 31.03% |
| Markup needed for a 50% margin | 100% |
A 45% markup on 1,200 gives a price of $1,740.00, but only a 31.03% margin. Markup and margin are never the same number.
How sensitive the answer is
Holding everything else steady and changing only cost, this is what happens to selling price. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Cost ($) | Selling price |
|---|---|
| $600 | $870.00 |
| $900 | $1,305.00 |
| $1,200 example above | $1,740.00 |
| $1,800 | $2,610.00 |
| $2,400 | $3,480.00 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Cost ($)
- A money amount, starting at $1,200.
- Markup on cost (%)
- A percentage, between 0 and 1000, starting at 45%.
What the results tell you
| Result | What it is |
|---|---|
| Selling price | The headline result. A money figure. |
| Profit | A money figure. |
| Resulting margin | A percentage. |
| Markup needed for a 50% margin | A percentage. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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