Markup Calculator
Calculate markup percentage, selling price, and profit margin instantly. Switch between four modes to find whichever value you need. Includes a clear markup vs margin comparison for UK businesses.
Enter cost price and markup % to calculate the selling price and profit margin.
Markup vs Margin: The Critical Difference UK Businesses Misunderstand
Markup and margin are two of the most commonly confused terms in business finance. Both describe the relationship between cost and selling price, but they use different bases for their calculations. Getting them mixed up can seriously undermine your pricing strategy and profit targets.
Here is the core distinction in plain English:
Markup
The profit expressed as a percentage of the cost price.
Markup = (Sell − Cost) ÷ Cost × 100
If cost is £10 and you sell for £15, the markup is 50%.
Margin
The profit expressed as a percentage of the selling price.
Margin = (Sell − Cost) ÷ Sell × 100
If cost is £10 and you sell for £15, the margin is 33.3%.
Notice how the same transaction produces a 50% markup but only a 33.3% margin. Both figures are correct — they just measure different things. This is why businesses that confuse the two often end up with lower profits than expected.
Markup Formula Explained
Markup Percentage Formula
To find selling price from markup: Selling Price = Cost × (1 + Markup% ÷ 100)
The markup formula is straightforward once you remember it is always relative to cost. If your product costs £20 to produce and you want a 75% markup, your selling price should be £20 × 1.75 = £35. Your profit is £15, which is exactly 75% of your £20 cost.
Gross Profit Margin Formula
Gross Profit Margin Formula
To find selling price from desired margin: Selling Price = Cost ÷ (1 − Margin% ÷ 100)
Margin is what most accountants and financial analysts use because it relates profit directly to revenue — which is how income statements are structured. When a business reports a 30% gross margin, it means 30 pence of every pound of revenue is gross profit.
Markup vs Margin Comparison Table
This table shows how the same profit looks very different as markup compared to margin. Many business owners are surprised to discover that a 100% markup only equates to a 50% margin.
| Markup % | Margin % | Example: Cost £10 | Selling Price |
|---|---|---|---|
| 10% | 9.09% | £10 cost | £11.00 |
| 20% | 16.67% | £10 cost | £12.00 |
| 25% | 20.00% | £10 cost | £12.50 |
| 33.3% | 25.00% | £10 cost | £13.33 |
| 50% | 33.33% | £10 cost | £15.00 |
| 100% | 50.00% | £10 cost | £20.00 |
| 200% | 66.67% | £10 cost | £30.00 |
Calculating Selling Price from a Desired Margin
A common mistake is to simply add the desired margin percentage to the cost price. This does not work correctly. If you want a 25% margin and your cost is £10, you cannot just add 25% to get £12.50 — that gives you a 20% margin, not 25%.
The correct formula is: Selling Price = Cost ÷ (1 − Margin%/100)
For a 25% margin on a £10 cost: £10 ÷ (1 − 0.25) = £10 ÷ 0.75 = £13.33
Industry Standard Markups and Margins
Understanding what constitutes a “good” markup depends heavily on your industry. Here are typical ranges for UK sectors:
| Industry | Typical Markup | Gross Margin Equivalent |
|---|---|---|
| Supermarket / Grocery Retail | 2–8% | 2–7% |
| General Retail | 40–100% | 29–50% |
| Clothing & Fashion | 100–200% | 50–67% |
| Restaurants (on food cost) | 150–300% | 60–75% |
| Electronics | 10–30% | 9–23% |
| SaaS / Software | 200–400%+ | 67–80%+ |
| Jewellery | 200–500%+ | 67–83%+ |
UK VAT and Markup: An Important Consideration
When setting prices in the UK, always calculate your markup on the ex-VAT (net) cost. VAT is collected on behalf of HMRC and is not your revenue — it passes straight through your business. If you include VAT in your cost or selling price calculations, your margins will be distorted.
For example: If you buy stock at £12 inc. VAT (20%), your actual cost is £10 ex-VAT. Your markup should be applied to £10, not £12. When you sell at £18 inc. VAT, your selling price ex-VAT is £15, giving you a £5 profit on £10 cost — a 50% markup.
Pricing Strategies: Which to Use?
Cost-plus pricing (markup-based) is the simplest approach: add a fixed percentage to your cost. It is transparent and easy to implement, making it popular in manufacturing, wholesale, and construction. The downside is that it ignores what customers are willing to pay.
Value-based pricing sets price based on the perceived value to the customer, regardless of cost. This can achieve much higher margins — software products often use this approach. It requires deep understanding of your customer’s problems and alternatives.
Competitive pricing anchors your price to what competitors charge, then adjusts based on your positioning. Common in retail where price comparison is easy.
Keystone Pricing: The Traditional Retail Method
Keystone pricing is the practice of doubling the wholesale cost to arrive at the retail price — in other words, a 100% markup or 50% margin. It was historically the standard in independent retail and remains common today. The rule of thumb works because it accounts for typical operating costs (rent, staff, marketing, shrinkage) while leaving a reasonable net profit.
However, keystone pricing is less reliable in competitive categories like electronics or commodity goods where price comparison is instant and margins are compressed by competition.
Online Retail Markup Considerations
Selling online through marketplaces like Amazon, eBay, or Etsy significantly affects your effective markup. You must account for:
- Platform fees: Amazon charges 8–15% referral fees on most categories, plus FBA fulfilment fees if using their warehouse.
- Payment processing: Typically 1.5–3% of revenue.
- Shipping costs: Often absorbed by the seller to remain competitive.
- Returns: UK consumer law gives customers 14 days to return goods purchased online (Consumer Rights Act 2015).
- Advertising: PPC and sponsored listings on Amazon can add 5–20% to effective customer acquisition cost.
On Amazon, a product with a 100% markup on COGS may yield a net margin of only 10–20% after all fees. Always model the full cost stack before setting prices.
Break-Even Analysis with Markup
Break-even is the point where total revenue equals total costs. To use markup in break-even analysis:
- Calculate your total fixed costs per month (rent, salaries, insurance, etc.)
- Determine your average gross profit per unit (selling price minus variable cost)
- Break-even units = Fixed Costs ÷ Gross Profit per Unit
For example: If fixed costs are £5,000/month and you make £10 gross profit per unit, you need to sell 500 units per month to break even. Any sales above that contribute to net profit.
Worked Examples
Example 1: Clothing Retailer
A Manchester clothing boutique buys a dress for £22 ex-VAT and wants a 120% markup to cover operating costs and achieve a healthy profit.
- Selling Price = £22 × (1 + 120/100) = £22 × 2.2 = £48.40 ex-VAT
- Retail price inc. 20% VAT = £48.40 × 1.2 = £58.08 (rounded to £57.99)
- Gross Profit = £48.40 − £22 = £26.40
- Gross Margin = £26.40 ÷ £48.40 × 100 = 54.5%
Example 2: Electronics Shop
An online electronics retailer buys a Bluetooth speaker for £35 and wants to be competitive. They apply a 20% markup.
- Selling Price = £35 × 1.20 = £42.00
- Gross Profit = £7.00
- Gross Margin = £7 ÷ £42 × 100 = 16.7%
- After Amazon fees (~13%) and shipping (~£4), effective net profit is approximately £1.54 — just 3.7% net margin.
This illustrates why electronics retailers must model all costs, not just product markup.
Example 3: Food Business
A London restaurant serves a pasta dish with a food cost of £3.20 and wants a 200% markup (industry standard is 150–300%).
- Menu price = £3.20 × 3.0 = £9.60 (rounded to £9.95)
- Gross Profit on food = £9.95 − £3.20 = £6.75
- Food cost % = £3.20 ÷ £9.95 = 32.2% (within industry target of 28–35%)
Markup in Excel: Spreadsheet Formula
To calculate markup in Microsoft Excel or Google Sheets:
| What you want | Excel Formula | Example |
|---|---|---|
| Selling price from markup % | =Cost*(1+Markup/100) | =A2*(1+B2/100) |
| Markup % from prices | =(Sell-Cost)/Cost*100 | =(B2-A2)/A2*100 |
| Margin % from prices | =(Sell-Cost)/Sell*100 | =(B2-A2)/B2*100 |
| Cost from selling price & markup | =Sell/(1+Markup/100) | =A2/(1+B2/100) |
Corporation Tax Impact on Profit Margins
UK Corporation Tax (25% for profits above £250,000; 19% for profits below £50,000 from April 2023) applies to net profit after all expenses, not gross profit. However, your gross markup directly determines how much gross profit is available to cover operating expenses and ultimately reach taxable net profit. A business with a 40% gross margin that has 35% operating costs only generates 5% net profit before tax — leaving very little for Corporation Tax and retained earnings. Ensuring adequate markup at the pricing stage is critical to healthy post-tax returns.
Frequently Asked Questions
What is the difference between markup and margin?
Markup is the profit expressed as a percentage of the cost price, while margin (gross profit margin) is the profit expressed as a percentage of the selling price. Because they use different bases, the same pound profit produces different percentages. For example, if a product costs £10 and sells for £12.50, the markup is 25% but the margin is 20%. Always clarify which measure you are using when discussing pricing with colleagues, accountants, or suppliers.
How do I calculate markup percentage?
Markup percentage = (Selling Price − Cost Price) ÷ Cost Price × 100. For example, if your cost is £20 and your selling price is £30, the markup is (30−20) ÷ 20 × 100 = 50%. Alternatively, use our calculator above by selecting “Find Markup %” mode and entering your cost and selling prices.
What is a good markup for a retail business?
A good markup depends heavily on your industry and cost structure. General retail typically uses 50–100% markup (keystone pricing). Clothing and fashion often use 100–200%, while electronics may be as low as 10–30% due to competition. The right markup must cover all your fixed and variable costs and leave sufficient net profit. As a rule of thumb, calculate your break-even markup first, then add your desired profit margin on top.
How do I convert markup to margin?
To convert markup percentage to margin percentage: Margin % = Markup % ÷ (100 + Markup %) × 100. For example, a 25% markup: 25 ÷ (100 + 25) × 100 = 20% margin. To go the other way (margin to markup): Markup % = Margin % ÷ (100 − Margin %) × 100. So a 25% margin = 25 ÷ 75 × 100 = 33.3% markup.
Should I use markup or margin for pricing?
Both are valid tools, but margin is generally preferable for financial reporting and benchmarking because profit and loss statements express profit as a percentage of revenue. Most published industry data uses margin figures. However, markup is often more intuitive when starting from a cost and building a price — particularly in manufacturing and wholesale. The key is consistency: pick one measure, apply it throughout your business, and make sure everyone on your team understands which they are using.
What is a 50% markup on £10?
A 50% markup on a £10 product gives a selling price of £15. Calculation: £10 × (1 + 50 ÷ 100) = £10 × 1.5 = £15. The gross profit is £5. Note that while this is a 50% markup (relative to cost), it is only a 33.3% margin (relative to the £15 selling price). This is one of the most common misconceptions in retail pricing.