How markup works
Markup is the amount you add on top of your cost, written as a percentage of that cost. It's the natural way to price when you start from what you paid: take the cost, add a percentage, and that's the price.
markup = (price − cost) ÷ cost × 100
price = cost × (1 + markup ÷ 100)
Example
A bike shop buys a helmet for $45 and applies its standard 80% markup. The price is $45 × 1.8 = $81. Profit is $36, which is 80% of the cost but only 44.4% of the price.
Why markup and margin differ
Both describe the same profit, they just divide it by different things. Markup divides by cost, margin divides by price. Because the price is bigger than the cost, the margin always comes out lower.
This catches people out when a target is set as a margin but applied as a markup. Adding 30% to cost gives a 23% margin, not 30%. If your accountant or your marketplace reports margins, use the margin to markup converter before you set prices.
Common markups
| Markup | Price for a $100 cost | Margin |
|---|---|---|
| 25% | $125 | 20% |
| 50% | $150 | 33.3% |
| 75% | $175 | 42.9% |
| 100% | $200 | 50% |
| 150% | $250 | 60% |
| 200% | $300 | 66.7% |