Markup formulas
Selling price = cost × (1 + markup)
Markup % = (price − cost) ÷ cost × 100
Margin % = (price − cost) ÷ price × 100
Markup vs margin table
| Markup | Margin |
|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% (keystone) | 50% |
| 150% | 60% |
| 200% | 66.7% |
Example
A product costs $40 to make. With a 50% markup, the price is $40 × 1.5 = $60. Profit is $20, which is 50% of cost (markup) and 33.3% of the price (margin).
Pricing tips
- Include every cost per unit: materials, shipping, packaging and payment fees.
- Remember overhead like rent and wages must be covered by your total profit.
- Round to price points customers expect, such as $59.99 instead of $60.13.
Pricing to a target margin instead? Use the profit margin calculator.
Last reviewed October 2026.
Frequently asked questions
What is markup?
Markup is the amount added to the cost of a product to set its selling price, expressed as a percentage of cost. An item that costs $40 and sells for $60 has a $20 markup, which is 50%.
What is the difference between markup and margin?
Markup divides profit by cost; margin divides profit by price. The same $20 profit on a $40 item sold for $60 is a 50% markup but only a 33.3% margin. Mixing them up is a common pricing mistake.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup is 0.5 ÷ 1.5 = 33.3% margin. To go the other way, markup = margin ÷ (1 − margin), so a 40% margin needs a 66.7% markup.
What is keystone pricing?
Keystone pricing means doubling the cost to set the price, which is a 100% markup and a 50% margin. It is common in retail, especially clothing and gifts.
What markup should I use?
It varies by industry: grocery stores often work on thin margins, while jewelry, furniture and restaurants use high markups to cover overhead. Start from your costs and target profit, then check what competitors charge.