Markup & Margin Calculator

Markup and gross margin are two different ways of expressing the same profitability concept — but from different perspectives. Understanding the difference is essential for anyone pricing products, managing a business, or analyzing financial statements.

Markup is profit expressed as a percentage of cost. If you buy a product for $40 and sell it for $60, the profit is $20, and the markup is $20 ÷ $40 = 50%. Markup tells you how much you've increased the price above your cost.

Gross margin is profit expressed as a percentage of revenue (selling price). That same $20 profit on a $60 sale gives you a gross margin of $20 ÷ $60 = 33.3%. Margin tells you what percentage of each dollar of revenue is profit.

These two numbers always describe the same transaction differently — and they're easy to confuse. A 50% markup does NOT equal a 50% margin. Converting between them: Markup = Margin ÷ (1 − Margin). Margin = Markup ÷ (1 + Markup). Example: 50% markup = 33.3% margin. 33.3% margin = 50% markup.

Industry markup benchmarks: Electronics and appliances: 5–15% markup. Groceries: 10–25%. Clothing: 100–200%. Jewelry: 100–200%. Restaurants: 200–400% on food ingredients. Software: 500–1,000%+. These high-margin businesses reflect not just material cost but also substantial overhead, labor, and value-added components.

Pricing strategy: Start with your total cost (materials + labor + overhead + a portion of fixed costs), then apply a markup sufficient to cover your desired profit margin. A common mistake is pricing based only on materials, forgetting labor and overhead costs, which results in a business that generates revenue but not profit.

Keystone pricing in retail is 100% markup (2× cost) — a simple rule of thumb that many retailers use as a starting point before adjusting based on market conditions.