What is markup?
Markup is the number you multiply your cost by to arrive at a selling price. In one figure, it builds in the taxes, the fees, the share of overhead each sale has to carry and the profit you want to make.
The most common mistake is stacking percentages on top of cost: a $30 cost plus 38% comes to $41.40. It looks right, but those 38% are charged on the selling price, not on the cost. Sell at $41.40 and your 12% profit simply never shows up.
How to calculate markup
Then just multiply: selling price = cost × markup. The markup divisor is the same math seen from the other side: price = cost ÷ divisor.
Worked example with the calculator's numbers
| Item | % of price | Amount |
|---|---|---|
| Product cost | 62% | $30.00 |
| Taxes | 6% | $2.90 |
| Fees and commissions | 5% | $2.42 |
| Overhead | 15% | $7.26 |
| Profit | 12% | $5.81 |
| Selling price | 100% | $48.39 |
The percentages add up to 38%. Markup: 100 ÷ 62 = 1.6129. Price: $30.00 × 1.6129 = $48.39.
How to find your overhead percentage
Add up your fixed monthly expenses (rent, payroll, your own salary, accountant, software) and divide by your average monthly revenue. If overhead comes to $15,000 and you bring in $100,000, every sale has to carry 15% to pay for it.
Where taxes fit in
Only count taxes that come out of the price you charge. If you sell in a country with VAT or GST and your prices include it, put that rate in the taxes field. If sales tax is added on top at checkout, as in most US states, the customer pays it on top and you can leave the field at 0.
When markup alone isn't enough
Markup tells you the price that makes your numbers work. The market tells you the price customers will accept. If your calculated price lands well above the competition, the fix is in your cost or your overhead, and your contribution margin shows how much each sale really leaves behind.
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What is the difference between markup and profit margin?
Markup is the multiplier you apply to cost to set the price. Profit margin is the share of the selling price you keep as profit. A markup of 1.61 can hide a profit margin of just 12%, because the rest of the price goes to taxes, fees and overhead.
What is a good markup?
There is no universal number. It depends on your overhead, the taxes built into your price and the profit your business needs. Retailers tend to run lower markups and high volume; services and custom products usually carry higher markups.
Can I use this calculator for a service?
Yes. Use as your cost the hours of direct labor plus any materials the job consumes.
Why can't the percentages add up to 100%?
Because the cost of the product also takes up part of the price. If taxes, fees, overhead and profit add up to 100% or more, there is no room left for the cost, and no price can make the math work.
Educational tool. Results are estimates based on the numbers you enter and are not a substitute for advice from your accountant.