Markup calculator
Easily calculate your markup to determine your pricing strategy. Enter your cost and markup percentage to get instant results!
Enter your markup information
To get started, enter two of the fields below and we will automatically calculate the rest.
What is markup?
Markup is the difference between the cost of a product or service and its selling price. It is added to the total cost of a product to arrive at a selling price.
FreshBooks markup calculator
Follow these steps to effortlessly calculate your markup:
Enter the total cost incurred to produce, acquire, or provide the product or service.
Enter the Markup Percentage. Specify the percentage you want to add to the cost price to determine the selling price. If you don't know your markup percentage, read the section "How to find markup percentage."
Instantly see your calculated margin, revenue, and profit, empowering informed pricing decisions.
Markup formula
The markup formula is:
Markup = Selling Price - Cost Price
This formula helps businesses determine the additional amount they need to add to their cost price to set a profitable selling price.
How to calculate markup?
Understanding the Basics
Cost Price
This is the amount you pay to acquire or produce a product.
Selling Price
This is the price you charge customers for the product.
Markup
This is the difference between the selling price and the cost price. It’s the amount you add to the cost to determine the selling price.
Markup Percentage
This expresses the markup as a percentage of the cost price.
Steps to Calculate Markup Percentage
Determine the Cost Price
Identify the exact cost of your product. This includes all direct costs associated with bringing the product to sale.
Determine the Selling Price
Decide on the price you want to charge your customers.
Calculate the Markup Amount
Subtract the cost price from the selling price: Markup Amount = Selling Price – Cost Price
Example
Let’s say a product costs you $50 to make.
You want to sell it for $75.
Cost price: $50
Selling price: $75
Markup amount: $75 – $50 = $25
Therefore, your markup amount is $25
How to find markup percentage
To calculate markup percentage, use the following formula:
Markup Percentage = (Markup / Cost) x 100
This percentage is crucial for evaluating profitability and comparing pricing strategies.
Example
In the previous section, we calculated the markup amount now let's calculate the markup percentage, using the formula we just learned:
Markup amount: $25
Markup percentage: ($25 / $50) x 100 = 50%
Therefore, your markup percentage is 50%.
Markup vs margin: key differences
Don't mix up markup and margin! While they're sometimes used as synonyms, they're not the same. Understanding their distinct calculations is key to accurate pricing and really knowing your profit picture.
Markup: A Percentage of Cost | Margin: A Percentage of Revenue | |
|---|---|---|
Definition |
| Margin is the percentage of the selling price that represents your profit. |
Formula | (Selling Price - Cost Price) / Cost Price x 100 | (Selling Price - Cost Price) / Selling Price x 100 |
Focus | How much you're adding on top of your costs. | How much of your revenue remains after covering costs. |
Example | If a product costs $50 and you sell it for $75, your markup is 50%. | Using the same example, your margin is 33.3% ($25 profit / $75 selling price). |
Markup examples
Markup is used across various industries. For example:
Retail
A clothing store might add a 50% markup to the cost of a t-shirt.
Wholesale
A distributor might add a 20% markup to the cost of goods sold to retailers.
Service-based businesses
A consultant might add a markup to their hourly rate to cover overhead costs and profit.
Benefits of using a markup calculator
Using a markup calculator offers several benefits for businesses:
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