How to calculate markup
Selling price = Cost × (1 + Markup % ÷ 100)
Profit = Selling price − Cost
Resulting margin % = (Profit ÷ Selling price) × 100
You can also convert directly between the two:
Margin = Markup ÷ (1 + Markup)
with both expressed as decimals.
Worked example
A candle costs you $20 including wax, jar, wick and packaging. You apply a 60% markup.
| Step | Calculation | Result |
|---|
| Selling price | $20 × 1.60 | $32 |
| Profit | $32 − $20 | $12 |
| Resulting margin | $12 ÷ $32 | 37.5% |
A 60% markup sounds generous, but it is a 37.5% margin. If you planned your Google Ads budget assuming 60% of each sale was profit, you would overspend badly.
Markup vs margin
These two terms get swapped constantly, even by accountants and suppliers. Keep them straight like this:
- Markup answers: "How much did I add to my cost?" It is divided by cost.
- Margin answers: "How much of the price do I keep?" It is divided by price.
| Markup | Margin |
|---|
| 30% | 23.1% |
| 60% | 37.5% |
| 100% | 50% |
| 150% | 60% |
| 300% | 75% |
Markup is always the bigger number. When a supplier says "keystone pricing" they mean a 100% markup, which is a 50% margin. If you prefer to start from the margin you want, the selling price calculator does the reverse math, and the profit margin calculator checks prices you already have.
Choosing a markup that works for e-commerce
A markup that works in a physical shop can fail online, because online stores carry costs a local retailer often does not: payment processing, shipping (especially free shipping), returns, and paid traffic. When choosing a markup, consider:
- What the customer compares you to. Shoppers on Google Shopping see your price side by side with competitors. A markup far above the market will hurt click-through and conversion rate no matter how good your ads are.
- Your cost to acquire a sale. If you pay for most traffic, your margin needs to cover the ad cost per order and still leave profit. Run the resulting margin through the break-even ROAS calculator to see the minimum ROAS your campaigns must hit.
- Discount plans. If you run frequent sales, build that into the base markup. A 20% sitewide discount on a 60% markup product cuts your margin from 37.5% to about 21.9%.
- Price endings and thresholds. After calculating, round to a sensible price point ($31.99 or $32) and check whether you sit just above a free-shipping threshold.
Tips for using markup well
- Use a different markup per category. Low-cost accessories can carry a higher markup than expensive core products, where shoppers are more price sensitive.
- Recalculate when costs change. Supplier and freight increases silently erode margin if prices stay fixed.
- Check margin before every promotion so you know exactly how deep you can discount.
- Feed margin data into your ads. Labeling products by margin tier in Merchant Center (with custom labels) lets you set separate ROAS targets in Shopping and Performance Max campaigns.