Glossary · Finance
What is Markup?
Definition
Markup is the amount you add on top of what something costs you to arrive at its selling price, usually expressed as a percentage of cost.
Markup % = (selling price − cost) ÷ cost × 100
Why it matters
Markup and margin describe the same sale from two angles, and mixing them up is a classic pricing error. Markup is based on cost; margin is based on the selling price.
If you buy a wholesale tote bag for $10 and sell it for $25, your markup is $15 over a $10 cost, or 150 percent. Your gross margin on that same sale is $15 divided by $25, or 60 percent.
A 50 percent markup does not give a 50 percent margin. A $10 item marked up 50 percent sells for $15, which is only a 33 percent margin. Decide your target margin first, then work backward to the price.
Common mistakes
- !Assuming a 50 percent markup produces a 50 percent margin and underpricing as a result.
- !Applying the same markup to every product without checking competitor prices or demand.
Frequently asked questions
What is Markup?
Markup is the amount you add on top of what something costs you to arrive at its selling price, usually expressed as a percentage of cost.
How do you calculate Markup?
Markup % = (selling price − cost) ÷ cost × 100
What mistakes do beginners make with Markup?
Assuming a 50 percent markup produces a 50 percent margin and underpricing as a result. Applying the same markup to every product without checking competitor prices or demand.
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