Money Matters

Markup calculator: how to calculate markup

Use this markup calculator to work out a selling price, cost price, or markup percentage. You will also learn how markup works, how it differs from margin, and how to use it to set prices for your business.

Published June 25, 202612 min read Share

Key takeaways

• Markup is calculated from cost price, not selling price. It shows how much you add to cover costs and generate profit.
• Markup and margin are different. Markup is based on cost, while margin is based on selling price, so the percentages will never match.
• A markup calculator helps you work out selling price, cost price, or markup quickly and accurately. You only need two known values to calculate the third.
• Your markup must cover direct costs, overheads, and profit. If you leave out overheads or miscalculate markup, you risk underpricing your products.

Markup is the percentage added to the cost price of a product to help you set its selling price.

For example, if a product costs R100 and you add a 50% markup, the selling price is R150.

Whether you’re a seasoned entrepreneur or just starting out, having a solid grasp on markup is critical to ensure you get your selling prices right. 

By the end of this read, you’ll have a clear understanding of what markup is and how to calculate it so you can make informed pricing strategy choices.  

Most importantly, you will never get your markup and margin confused again. 

This article explains how to calculate markup, how markup differs from margin, and how to use a markup calculator to support your pricing decisions.

Here’s what we’ll cover:

What is a markup calculator?

You can use the markup calculator to check pricing for your own products.

You can also use it to model competitor pricing, but any competitor cost estimate should be treated as an assumption, not a confirmed figure.

Use the markup calculator to work out:

• Selling price: enter cost price and markup percentage
• Cost price: enter selling price and markup percentage
• Markup percentage: enter selling price and cost price

Enter the two values you already know, then select calculate.

The calculator will show the missing value.

Toggle through the buttons at the top, to calculate either selling price, cost price or markup percentage. 

What is markup?

Markup is the percentage you add to a product’s cost price to set its selling price.

It is calculated from cost price, not selling price.

It’s the amount you’re “marking up” the price from what you paid for it.

It is calculated by dividing the profit (selling price minus cost) by the cost price and then multiplying by 100.

Markup formula

Markup = ((Selling price – Cost price) / Cost price) x 100

Example, if you sell a product for R100 that costs you R60 to produce, your markup would be:

Markup = ((100 − 60)/60) × 100 = 66.67%

This means you’re selling the product for 66.67% more than it cost to produce.

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In simple terms

Markup uses the cost price as the base and margin uses the selling price as the base.

Because of this, markup percentages will always be higher than margin percentages for the same item.

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How is markup expressed as a percentage or multiplier?

Markup can also be expressed as a multiplier.

A 2.5 multiplier means the selling price is 2.5 times the cost price.

This is equivalent to 150% markup.

If a dress costs R100 to manufacture, this would be sold for R250.

Common multiple to markup percentages include:

MULTIPLE	MARKUP	MARGIN
1.25	25%	20%
1.5	50%	33.33%
2	100%	50%
2.5	150%	60%
4	300%	75%
5	400%	80%
10	900%	90%

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How do you calculate selling price using markup?

Determining the selling price of your products using a markup percentage is a straightforward process.

By adding a specified percentage to the cost of your product, you can ensure that your selling price covers your costs and provides the desired profit.

Here’s a step-by-step guide on how to calculate the selling price using markup percentage:

Determine the cost price

The cost price is the total cost incurred to produce or purchase the product.

This includes manufacturing costs, shipping fees, and any other expenses directly associated with getting the product ready for sale (read below).

Decide on the markup percentage

The markup percentage is the percentage by which you want to increase the cost price to arrive at the selling price.

This percentage should account for your desired profit margin and other indirect costs.

Apply the markup percentage

Use the markup formula to calculate the selling price:

Selling Price = Cost Price + (Cost Price × Markup Percentage)

Alternatively, this can be simplified to:

Selling Price = Cost Price × (100% + Markup Percentage)

How do you calculate cost price from selling price and markup?

Starting with a selling price and reversing the calculation to determine the cost price is useful if you are thinking of launching a new product.

You can model possible competitor costs, but this is only an estimate and may differ due to supplier terms, volume, and operating costs.

If you know the selling price and the markup percentage applied, you can easily reverse-calculate to find the original cost price.

Formula for calculating cost price

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

Knowing how to calculate the cost price from the selling price and markup allows you to understand the base cost of your products, enabling you to adjust prices strategically without compromising on profitability.

Accurate cost-price calculations also help to value inventory, budget for future purchases, and manage cashflow effectively.

What is the difference between markup and margin?

Markup and margin both measure profit, but they use different starting points.

Markup is based on cost price. Margin is based on selling price.

These two terms are so often confused and if you get it wrong, you could be selling goods at a loss.

Markup and margin are both business terms used to refer to profitability, but they calculate profit in slightly different ways.

Understanding both markup and margin is crucial for businesses to set effective pricing strategies and analyse profitability.

Have a look at the differences so that you can ensure you make the right calculations.

MARGIN	MARKUP
The percentage of the selling price that is profit	The percentage added to the cost price to arrive at the selling price
Margin = ((Selling Price − Cost Price) / Selling Price) × 100	Markup = ((Selling Price − Cost Price) / Cost Price) × 100
Calculated based on the selling price	Calculated based on the cost price
If a product costs R60 and sells for R100, the margin is 40%	If a product costs R60 and sells for R100, the markup is 66.67%
Helps understand the profitability of sales	Helps determine the selling price needed to achieve desired profits

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Why the difference matters

Understanding the difference between margin and markup is important because it affects your pricing strategy and profitability.

• Pricing accuracy: Getting confused between markup and margin can lead to product underpricing, and a reduction in profit.
• Competitive analysis: Markup is useful for product comparison in different industries, to ensure that you are competitively pricing your products.
• Financial analysis: Margin is important for financial reporting, as it directly impacts your profit and loss statements. It also helps you understand the profitability of individual products and overall business performance.
• Pricing strategy: Both metrics are important for strategic planning. Markup is useful for setting initial selling prices, and margin helps to evaluate ongoing profitability.

How do markup and margin compare in practice?

Consider you own a food truck, and you want to set the selling price for a burger.

You know your cost to make the burger is R5.00, so you want to apply a 50% markup.

Using Markup

Step-by-step:

• Selling Price = R5.00 × (1 + 0.50) = R7.50
• Markup = R7.50 − R5.00 = R2.50
• Markup % = (R2.50 / R5.00) × 100 = 50%

This means you’re selling the burger for 50% more than it cost to produce.

If instead you want a 50% margin, you need to work backwards from the desired margin.

Using Margin

Step-by-step:

• Selling Price = R5.00 / (1 − 0.50) = R10.00
• Margin Amount = R10.00 − R5.00 = R5.00
• Margin % = (R5.00 / R10.00) × 100 = 50%

This means you’re keeping 50% of the selling price as profit.

A 50% margin on a burger costing R5.00 would need a selling price of R10.00

A 50% margin results in a higher selling price (R10.00) compared to a 50% markup on the same burger (R7.50).

A 50% markup gives a selling price of R7.50, while a 50% margin gives R10.00.

This shows that markup and margin are not interchangeable.

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What should you consider when setting markup?

When setting your markup, there are several factors to consider to make sure you set a profitable price that covers your costs and is competitive.

1. Cost of goods sold (COGS)

Cost of goods sold includes direct costs such as materials, labour, and manufacturing.

Overheads are indirect costs such as rent, utilities, and salaries.

2. Profit margin

Determine the profit margin you want to achieve.

This involves understanding your business goals to ensure that the markup not only covers costs but also provides a satisfactory profit.

3. Market conditions

Analyse the pricing strategies of your competitors.

Compare similar products to understand expected price ranges, then check your price still covers costs and target profit.

High-demand products can typically sustain higher markups, whereas low-demand items might require lower markups to boost sales.

4. Customer perception

Ensure that the markup reflects the perceived value of the product to the customer.

Luxury items can command higher markups due to their perceived value and exclusivity.

Also, consider the target market’s willingness and ability to pay.

Markups should balance profitability with customer affordability to maintain sales volume​.

5. Industry standards

Research average markups within your industry to ensure your pricing fits within your industry range.

This helps in setting competitive prices while maintaining profitability.

6. Product life cycle

For new or innovative products, initial markups might be higher to capitalise on early adopters.

Over time, markups may be adjusted as the product moves through its life cycle​.

Adjust markups based on seasonal demand.

Higher markups can be applied during peak seasons, while lower markups might be necessary during off-peak times to stimulate sales.

7. Sales strategy

Factor in planned discounts and promotional activities.

Ensure that even after discounts, the selling price remains profitable​.

Consider offering lower markups on bulk purchases to encourage higher sales volumes, which can lead to economies of scale and increased overall profitability​.

8. Economic factors

Monitor inflation rates, currency fluctuations, and other economic conditions that might affect the cost of goods and adjust your markup accordingly to maintain profitability.

9. Legal and regulatory requirements

Check that your pricing and promotions follow the rules for your sector. In South Africa, consumer pricing must avoid misleading or unfair practices.

If you are unsure, seek professional advice or check official guidance.

Should you include overhead costs in markup calculations?

Finally, don’t forget to include all your overhead costs when considering your markup.

Your costs of product are not limited to the direct cost of the goods, but also the indirect costs required for the running of the business:

• Direct costs: Include all direct costs associated with producing or purchasing the product, such as materials, labour, and manufacturing expenses.
• Indirect costs: Consider overhead costs such as municipal rates, rent, utilities, salaries, and administrative expenses that contribute to the overall cost structure.

To include overhead costs in your markup calculation, follow these steps:

Calculate total overhead costs

Identify all indirect costs associated with running your business.

This includes rent, utilities, salaries, office supplies, and other administrative expenses.

Determine overhead rate

Allocate overhead costs to individual products or services.

This can be done by determining an overhead rate, which is typically a percentage of direct costs or a fixed amount allocated based on the number of units produced or sold.

Add overhead to direct costs

Combine overhead costs with direct costs to get the total cost of producing or acquiring a product.

If you don’t consider your overhead costs then you could underprice your products with detrimental impact on your business.

Failing to consider your overheads and indirect costs will mean your cashflow will gradually decline and your income might not be enough to ensure you have sufficient cashflow to continue trading.

To summarise, here are the steps you need to take to include overhead costs in the markup calculation:

• List your indirect costs
• Choose an allocation method
• Calculate overhead per product
• Add overhead to direct costs
• Apply markup

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Once you’ve set your markup, monitoring your revenue and profit is crucial to ensure that the chosen markup is working for you.

As you grow, you can use cashflow management software to gain a real-time view of your revenue and profit and adjust your pricing as needed.

That knowledge and ability to act quickly is essential for retail operations.

Cloud financial solutions such as Sage Intacct include all these tools and enable that awareness and ability to act across multiple stores, locations, and organisations.

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Editor’s note: This article was originally published in September 2025 and has been updated for relevance.

Frequently asked questions on markup calculation

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