By ToolNestPro | Updated September 2026
How to Calculate Markup: A Simple Step-by-Step Guide
Markup helps you understand how much you add to the cost of a product or service when setting your selling price.
It is commonly used in retail, construction, freelancing and other businesses where you need to price work or products above their cost.
In this guide, you’ll learn how to calculate markup, understand the formula, see a simple example, and avoid confusing markup with profit margin.
How to Calculate Markup
The basic markup formula is:
Markup % = ((Selling Price − Cost Price) ÷ Cost Price) × 100
For example, if a product costs £80 and you sell it for £120:
Markup = ((£120 − £80) ÷ £80) × 100
Markup = 50%
This means you added a 50% markup to the original cost.
You can also calculate the selling price from a known markup percentage using:
Selling Price = Cost Price × (1 + Markup %)
For example:
£80 × 1.50 = £120
Markup vs Profit Margin: What’s the Difference?
Markup and profit margin are related, but they are not the same thing.
Markup is calculated using the cost price.
Profit margin is calculated using the selling price.
For example, if a product costs £80 and sells for £120:
Markup = 50%
Profit margin = 33.3%
This is because markup compares the profit to the original cost, while profit margin compares the profit to the selling price.
Understanding the difference is important when setting prices, because a 50% markup does not mean you are making a 50% profit margin.
What Is Markup?
Markup is the amount added to the cost of a product or service to arrive at the selling price.
It is usually expressed as a percentage of the original cost.
For example, if an item costs you £100 and you add a 25% markup, the selling price becomes £125.
Markup helps businesses cover costs and build profit into their pricing.
Common Markup Calculation Mistakes
Markup calculations are straightforward, but small mistakes can lead to prices that are too low or too high.
Common mistakes include:
confusing markup with profit margin
using the selling price instead of the cost price in the formula
forgetting to include all relevant costs
applying the same markup to every product or service without checking profitability
not updating prices when costs increase
For example, if your costs rise but your selling price stays the same, your actual markup percentage will fall.
Reviewing your markup regularly can help you keep your pricing aligned with your costs and profit goals.
Calculate Your Markup
Want to quickly work out the markup on a product or service?
Use our free Markup Calculator to calculate markup percentage, selling price and profit based on your cost.
Frequently Asked Questions
What is markup in simple terms?
Markup is the percentage added to the cost of a product or service to arrive at its selling price.
Is a 50% markup the same as a 50% profit margin?
No. A 50% markup produces a lower profit margin because markup is based on cost, while profit margin is based on the selling price.
Can markup be more than 100%?
Yes. A markup can be more than 100% if the selling price is more than double the original cost.