Calculate markup percentage, profit margin, and pricing for your products. Understand the difference between markup and margin to set profitable prices.
Calculate markup percentage, profit margin, and pricing for your products. Understand the difference between markup and margin to set profitable prices.
Generated: 1/13/2026, 7:14:05 AM | AskSMB.io
Cost to produce or purchase the product
Price charged to customers
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Cost price must be greater than zero
Markup is the percentage added to your cost to arrive at your selling price. It represents how much you're increasing the cost to determine your price. Markup is always calculated based on your cost price.
Profit margin (or margin) is the percentage of the selling price that is profit. Unlike markup which is based on cost, margin is based on the selling price. This is why margin is always lower than markup for the same transaction.
These terms are often confused but represent different perspectives. Markup asks: "How much am I adding to my cost?" Margin asks: "What percentage of my selling price is profit?" For a $100 product sold at $150: Markup = 50% ($50 markup on $100 cost). Margin = 33.33% ($50 profit on $150 selling price).
Markup ensures you cover costs and generate profit. Different industries have different standard markups based on overhead costs, competition, and customer expectations. Understanding your markup helps you price competitively while maintaining profitability. Too low, and you won't cover expenses. Too high, and you may lose customers to competitors.
Consider these factors when setting markup: (1) Calculate all your costs including overhead, (2) Research competitor pricing, (3) Understand your target customer's price sensitivity, (4) Factor in your desired profit margin, (5) Consider market positioning (premium vs budget), (6) Account for volume - higher volume may allow lower markup, (7) Review and adjust regularly based on market conditions.
Where:
Markup Amount = $60 - $40 = $20