How does the Markup Calculator work?
Selling price = cost × (1 + markup ÷ 100). The margin relates the profit to that selling price.
Background & details
Don't confuse markup with margin
The calculator returns the selling price, profit and margin. The classic retail trap: markup and margin are not the same. Markup relates profit to the cost price, margin relates it to the selling price. A 50 % markup gives only a 33 % margin. Doubling the cost (a 100 % markup, known as "keystone" pricing) lands exactly on a 50 % margin.
What typical values look like
- Grocery retail: low markups of 10–25 %, offset by high volume.
- Fashion and jewellery: often 100–250 %, because stock, returns and seasonality are costly.
- Hospitality: drinks are frequently marked up 300–400 %, food less so.
- Services: here an hourly rate matters more than a goods markup.
Common mistakes
- Counting only the goods: shipping, packaging, duty, storage and marketplace fees belong in the cost base, or the stated profit is too high.
- Treating markup as margin: mistaking a 40 % markup for a 40 % margin overstates profit every single time.
- Forgetting tax: calculate on the net figure. VAT or sales tax is added to the consumer price only at the very end.
A worked example
Say an item costs you £50 net to buy, plus £5 shipping and £3 packaging – so your real cost base is £58, not £50. If you want a 40 % margin, the formula calls for roughly 67 % markup (40 ÷ 60 × 100). That gives a net selling price of about £97, and your profit is £39 per unit. Only now does tax go on top, so at a 20 % rate the customer pays around £116. The catch: if you sell through a marketplace charging a 15 % fee, that fee eats a big slice of your profit – treat it as another cost line and build it in, or you will end the month with less than you expected.
Practical tips
Set the target margin your business needs first (rent, staff, profit), then derive the required markup from it – not the other way round. Next, check whether the resulting selling price is achievable in the market. If it is too high, work on costs, not on the margin.
When this tool is not the right one: psychological pricing (£9.99 instead of £10.40), blended pricing across a whole range (loss leaders cross-subsidised by others), or value-based pricing where customer value, not cost, sets the price. There, cost-plus markup is only the floor.