Calculate selling price from cost and markup percentage. Instantly convert between markup and margin — the most commonly confused pair in business pricing.
This is one of the most common sources of confusion in business. Markup and margin both measure profitability but they're calculated differently.
Example: You buy a product for $50 and sell it for $70. Your profit is $20.
• Markup = $20 ÷ $50 = 40% (40% above cost)
• Margin = $20 ÷ $70 = 28.6% (28.6% of selling price)
Markup works alongside these pricing and profit tools:
→ Profit Margin Calculator — Markup and margin are different — use this to calculate your actual profit percentage.
→ Discount Calculator — When offering discounts, see how much margin you retain at each discount level.
→ Break-Even Calculator — Find the minimum sales volume needed to cover costs at your markup price.
→ VAT Calculator — Add VAT to your marked-up selling price for the final customer-facing price.
Most pricing confusion comes from mixing up markup and margin. Enter either one to instantly convert.
Markup and margin express the same relationship between cost and selling price — but they are not interchangeable. Confusing them leads to systematically under-pricing your products or services.
Markup is calculated as a percentage of cost: (Selling Price - Cost) / Cost × 100. A 50% markup on a $10 cost gives a $15 selling price. Margin is calculated as a percentage of selling price: (Selling Price - Cost) / Selling Price × 100. The same $5 profit on the $15 selling price is a 33.3% margin. Same profit, different numbers — because they use different denominators.
Selling Price = Cost × (1 + Markup% / 100)
Markup% = (Selling Price - Cost) / Cost × 100
Margin% = (Selling Price - Cost) / Selling Price × 100
Markup → Margin: Margin = Markup / (100 + Markup) × 100
Margin → Markup: Markup = Margin / (100 - Margin) × 100
Use markup when starting from cost and working forward to a selling price — retail pricing, wholesale pricing, cost-plus contracts. Use margin when evaluating profitability or comparing to financial benchmarks — income statements, investor presentations, industry comparisons. When a business talks about its margins, it means gross margin. Use the converter above to switch between the two instantly.
Retail clothing typically uses 100-300% markup (50-75% margin). Restaurants apply 200-400% on food costs (66-80% margin). Software and SaaS products often achieve markups of 1000%+ on marginal cost. Professional services target 60-100% gross margins. Knowing your industry benchmark helps you assess whether your pricing is competitive and sustainable.
Cost-plus pricing is the simplest approach: calculate total cost, add your desired markup, and the result is your selling price. It guarantees cost coverage but ignores market pricing — customers pay based on perceived value, not your costs. Value-based pricing sets price based on the value delivered to customers. A consultant who saves a client $500,000 can charge $50,000 regardless of hourly cost. Use cost-plus to establish your floor price but let market and value considerations determine your ceiling. In commodity markets where products are interchangeable, competitive pricing applies — use the markup calculator to ensure competitive pricing still covers costs and target margin.
Markup calculation varies significantly depending on your business model. A product retailer, a service provider, and a SaaS business all use markup logic — but the inputs, targets, and considerations differ in ways that matter for getting pricing right.
In retail, markup must cover not just the cost of goods (COGS) but all the overheads that COGS alone does not account for: rent, staff, utilities, shrinkage (theft and spoilage), returns, and the cost of holding inventory. A common mistake is calculating markup against COGS only and ignoring these overhead costs, which results in prices that appear profitable but actually lose money at the business level.
The correct approach is to determine your target gross margin — the percentage of revenue you need to retain after COGS to cover overheads and profit — and work backward to the markup. If your operating costs (excluding COGS) are 35% of revenue and you want 10% net profit, you need a gross margin of at least 45%, which requires a markup of 45/(100-45) × 100 = 81.8% on your cost of goods.
For service businesses, "cost" is primarily the cost of the people delivering the service — their fully loaded hourly rate including salary, payroll taxes, benefits, and their share of overhead. To set a profitable service rate, calculate the fully loaded cost per billable hour, then apply a markup that covers non-billable time (admin, sales, training), overhead, and target profit margin.
A consultant with a fully loaded cost of $50/hour who bills 1,200 hours per year out of 2,080 total working hours (58% utilisation) needs to recover $50 × 2,080 = $104,000 in annual cost from 1,200 billable hours — meaning their minimum billable rate is $87/hour just to break even. A 50% markup on that break-even rate gives a $130/hour target rate, producing approximately $52,000 in annual gross profit from that consultant.
Software and digital products have near-zero marginal cost — the cost to serve one additional customer is negligible once the product exists. Traditional markup logic does not apply in the same way because COGS is essentially zero. Instead, pricing for digital products is driven by value-based logic: what outcome does the customer achieve, and what is that worth to them? The "cost" to account for is the development and ongoing infrastructure cost amortised over the expected customer base and lifetime. Price should reflect value delivered, not cost incurred.
Markup tells you what you need to charge to be profitable. Price elasticity tells you what customers will actually pay. In markets with many substitutes (commodity products, standard services), customers are highly price-sensitive — small markup increases lose significant volume. In markets where your product is genuinely differentiated or creates unique value, customers are less price-sensitive — higher markups are sustainable. The goal is to find the highest price the market will bear that still attracts sufficient volume. Use our Profit Margin Calculator to model different price-volume scenarios to find your optimal pricing point.