Markup Calculator

Introduction

Every product you sell has two prices in its life: what it costs you, and what you charge for it. The gap between them is your profit, and getting that gap right is the difference between a business that grows and one that slowly loses money. Price too low and you work hard for nothing. Price too high and customers go elsewhere. This Markup Calculator works out the selling price and the profit from your cost and the markup you want to add, so you can price a product in seconds instead of fumbling with a calculator.

It is made for retailers, online sellers, wholesalers, freelancers and small business owners who set prices every week. You enter the cost price and a markup percentage, and the calculator shows the selling price and the profit on each sale.

What is Markup?

Markup is the amount added to the cost price of a product to arrive at its selling price. It is usually stated as a percentage of the cost. A markup of 40 percent on a product that costs 100 means you add 40 to the cost, and sell it for 140.

Markup is not the same as profit margin, and mixing the two up is the most common pricing mistake. Markup is a percentage of the cost price, while profit margin is a percentage of the selling price. A 40 percent markup on a cost of 100 gives a profit of 40 on a selling price of 140, which is a profit margin of about 28.6 percent, not 40 percent. Keep them separate and your pricing will stay honest.

How to Use the Markup Calculator

Follow these steps to price a product:

1. Enter the Cost Price, the amount the product costs you, for example 100.
2. Enter the Markup (%), the percentage you want to add, for example 40.
3. Click Calculate to see the Selling Price and the Profit.

Enter the cost without a currency symbol, and enter the markup as a number, such as 40 for 40 percent. Use the same currency for the cost and the selling price, and remember that the result does not include tax, delivery or other selling costs unless you add them to the cost price first.

The Markup Formula

The calculator uses two simple formulas:

Selling Price = Cost Price x (1 + Markup Percentage / 100)

Profit = Selling Price – Cost Price

In words, the selling price is the cost plus the markup amount, and the profit is the difference between the selling price and the cost. If you want a particular selling price instead, you can work backwards: divide the selling price by the cost price, subtract one, and multiply by 100 to get the markup percentage.

Worked Example

Take a product that costs 100, with a markup of 40 percent.

First, the markup amount is 40 percent of 100, which is 40. Add it to the cost: 100 + 40 = 140. The profit is the selling price minus the cost: 140 – 100 = 40.

So the Selling Price is 140.00 and the Profit is 40.00, which is exactly what the calculator shows for these inputs. If you sell ten of these products, your total profit is 400, before tax and other costs.

When to Use It and Tips

Use this calculator when you are pricing a new product, reviewing your prices, working out a discount you can afford to offer, or checking whether a product line is actually making money. It is also useful when a supplier raises their prices, because you can see at once what the new selling price should be.

• Set the markup to cover all your costs, not just the product cost: delivery, packaging, fees and your time all need paying for.
• Do not confuse markup with profit margin when you talk to an accountant or read a report.
• Review your markup regularly. Costs rise, and a price set a year ago may no longer make a profit.
• Test higher and lower markups to see how they change the selling price, and check the price against competitors.

If a pay rise has changed what your own time is worth, the Pay Raise Calculator shows your new salary and the size of the rise. If you are borrowing to buy stock, the Loan Calculator can help you work out whether the loan cost still leaves a profit.