Calculate your markup percentage and profit margin from cost and selling price. Understand the crucial difference between the two.
Markup Percentage
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Markup is the percentage added to cost to get the selling price (profit / cost). Margin is the percentage of the selling price that is profit (profit / selling price). A 100% markup equals a 50% margin. Confusing the two is one of the most common pricing mistakes in small business.
Markup is calculated on cost (how much you add to your cost), while margin is calculated on selling price (what percentage of the sale is profit). A 50% markup means you add half the cost as profit. A 50% margin means half the selling price is profit.
Markups vary by industry: retail typically uses 50-100%, food service 200-300%, and professional services 100-500%. Consider your competitors, value proposition, and target market.