Formula, in Pricing Strategy
Markup Formula: How to Calculate Markup Percentage
The Markup Formula helps businesses determine the percentage added to a product's cost to arrive at its selling price, directly impacting profitability.
3 variables. Published Mar 12, 2026. Updated Mar 27, 2026. By AI Biz Hub.
Markup Percent = (Sale Price - Cost) / Cost x 100 Variables
MP
Markup Percent
The markup as a percentage of cost. Distinct from margin, which is a percentage of price; a 100% markup is only a 50% margin.
SP
Sale Price
The price charged to the customer, in currency units. Must exceed cost for a positive markup.
Cost
Cost
The cost of the product or service to you, in currency units. The base the markup is added on top of.
Step by step
- 1
Set the baseline case with the real calculator inputs.
Mode = Cost + margin to price, Cost = $40.00, Margin = 35.0%
- 2
Make sure cost is the full landed cost (including freight and fees), not just the supplier invoice, before computing the percentage.
A 40 supplier price plus 5 freight gives a 45 landed cost.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with sale price at $61.54, gross profit at $21.54, and markup percent at 53.85%.
- 4
Re-run to convert markup into margin so you do not overstate profitability, since markup percentages always read higher than the equivalent margin.
A 50% markup on a 40 cost sells at 60, which is only a 33% margin.
Worked example
Markup sample case
Mode
Cost + margin to price
Cost
$40.00
Margin
35.0%
In Cost + margin to price mode the calculator sets sale price = cost / (1 - margin/100) = 40 / 0.65 = $61.54. Gross profit = 61.54 - 40 = $21.54, and markup percent = 21.54 / 40 x 100 = 53.85%.
The calculator lands with sale price at $61.54, gross profit at $21.54, and markup percent at 53.85%.
Common variations
Run the numbers next
- Run the Numbers SaaS Pricing Strategy Calculator
Set monthly price floors from gross-margin and CAC payback constraints.
- Run the Numbers Wholesale Pricing Calculator
Set wholesale price, retail price, and MOQ revenue from unit cost and overhead using cost-plus, keystone, or target-margin strategies.
Questions people ask next
What is the markup formula?
Markup percent equals (Sale Price minus Cost) divided by Cost, times 100. It expresses the amount added to a product's cost as a percentage of that cost, which directly sets the selling price and influences profitability.
How do you calculate markup percentage with an example?
Take the sale price minus the cost, divide by the cost, and multiply by 100. On the page's worked case using a $40.00 cost in the calculator, the sale price lands at $61.54 with $21.54 of gross profit, a 53.85% markup; a simpler check is a 50% markup on a $40 cost, which sells at $60.
What is the difference between markup and profit margin?
Markup is a percentage of cost, while margin is a percentage of price, so markup always reads higher than the equivalent margin. A 100% markup is only a 50% margin, and a 50% markup on a $40 cost (selling at $60) is just a 33% margin, so converting markup to margin avoids overstating profitability.
Should I use the supplier invoice price or full landed cost for markup?
Use the full landed cost, including freight and fees, not just the supplier invoice, before computing the markup percentage. For example, a $40 supplier price plus $5 freight gives a $45 landed cost that the markup should be applied on top of.
Sources
- What Is Markup? , Investopedia
- Markup vs. Margin: What's the Difference? , Shopify
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