What markup should I use?

It varies enormously by sector — grocery retail often runs single-digit margins while software can exceed 80%. Work backwards from the margin your fixed costs require.

How do I convert margin to markup?

Markup = margin ÷ (1 − margin). A 40% margin needs a 66.7% markup.

Should cost include overheads?

Unit cost usually covers direct costs only. Your markup then has to cover overheads as well as profit, which is why it must be well above your target margin.

Markup Calculator

Markup is the percentage added to cost to reach a selling price. It is not the same as margin, and confusing the two is one of the most common pricing mistakes in small business.

Fill in the fields above and select Calculate to see your result and the full working.

Please note: Financial calculators produce estimates using the figures you enter. They exclude fees, taxes, insurance and rate changes unless a field asks for them. They are not financial advice — confirm any significant decision with a qualified adviser or your lender.

Formula used

Price = cost × (1 + markup ÷ 100). Margin = (price − cost) ÷ price × 100

How to use this calculator

Enter what the unit costs you, including landed shipping and packaging.
Enter the markup percentage you apply.
Check the equivalent margin — this is the figure your accounts will report.

Example calculation

An item costing $40 with a 60% markup:

Profit = 40 × 0.60 = $24

Price = $64

Margin = 24 ÷ 64 = 37.5%.

What does this result mean?

Markup is measured against cost; margin is measured against selling price. A 60% markup produces only a 37.5% margin. If you need a specific margin, work backwards: price = cost ÷ (1 − margin). Pricing on markup while budgeting on margin is a reliable way to run out of money.

Frequently asked questions

What markup should I use?: It varies enormously by sector — grocery retail often runs single-digit margins while software can exceed 80%. Work backwards from the margin your fixed costs require.
How do I convert margin to markup?: Markup = margin ÷ (1 − margin). A 40% margin needs a 66.7% markup.
Should cost include overheads?: Unit cost usually covers direct costs only. Your markup then has to cover overheads as well as profit, which is why it must be well above your target margin.

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