🏷️ If you’re running a business or selling a product, knowing your markup percentage is a must. It helps you price your goods correctly and make sure you’re not leaving profits on the table.
In this article, we’ll show you exactly what markup percentage is, how to calculate it, when to use it, and even give you a handy calculator to do the math for you.
Table of Contents
💡 What Is Markup Percentage?
Markup is the amount you add to the cost of a product in order to arrive at its selling price. Markup percentage shows how much extra, in percentage terms, you’re charging above your cost.
It answers the question: “How much more am I selling this for compared to what it cost me?”
🧮 Markup Percentage Formula
Here’s the formula:
Markup (%) = (Selling Price − Cost) ÷ Cost × 100
This formula is different from margin, which is based on selling price. Markup is based on cost.
📊 Example Calculation
Let’s say you buy a product for $40 and you sell it for $100.
Markup (%) = (100 − 40) ÷ 40 × 100 = 150%
That means your markup is 150%, or you’ve added $60 above the cost.
🧾 When Should You Use Markup?
Markup is best used when you are pricing items, especially if you’re running a retail or product-based business. It helps ensure you make enough profit to cover your expenses and keep your business running smoothly.
✅ Use markup when:
- You’re deciding on pricing for products or services
- You want to ensure your cost is fully covered with profit
- You’re building pricing tiers based on wholesale cost
📎 Final Thoughts
Markup percentage is an essential number to know when pricing your products. It helps you strike a balance between profitability and competitiveness.
If you’re unsure about whether to use markup or margin, remember:
- Use markup when pricing
- Use margin when analyzing profits