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Markup is the percentage added to cost price to arrive at selling price. If you buy a product for $80 and want a 25% markup, your selling price is $100 and your profit is $20. A markup calculator lets you work out the selling price, profit amount, and resulting gross margin from any cost and markup combination.
The markup formula is: Selling Price = Cost × (1 + Markup/100). Gross Profit = Selling Price - Cost. Gross Margin = Gross Profit / Selling Price × 100. The key insight is that a 25% markup does not produce a 25% gross margin. As noted by AccountingCoach, markup is always calculated on cost while margin is always calculated on selling price.
Markup vs Margin Conversion Table
| Markup (%) | Gross Margin (%) | Price multiplier |
|---|---|---|
| 10% | 9.1% | 1.10x |
| 25% | 20.0% | 1.25x |
| 50% | 33.3% | 1.50x |
| 100% | 50.0% | 2.00x |
| 200% | 66.7% | 3.00x |
With that in mind, if you have a gross margin target of 50%, you need a 100% markup. Retailers who think in margin terms need to narrow down the equivalent markup before setting prices.
Industry Markup Standards
Different industries use very different markup conventions. Retail clothing typically uses a 100-200% markup (keystone and above). Grocery stores work with tight 10-30% markups due to high competition and volume. Restaurants build up pricing at 200-400% markup on food cost to cover overhead. Given that, you should benchmark your markup against your industry before deciding what is appropriate.
The SBA guide to pricing recommends working out your total costs first, then applying a markup that covers overhead and desired profit margin. Use our Gross Margin Calculator to verify the resulting margin, and the Percent Off Calculator to model what happens to your margin when you carry out a sale.
Keystone Pricing
Keystone pricing is a traditional retail strategy that sets selling price at exactly 2x the wholesale cost, representing a 100% markup (50% gross margin). On top of that, this simple multiplier makes wholesale-to-retail calculations fast and consistent across large catalogs. That said, with increasing price transparency, rigid keystone pricing can make businesses uncompetitive in some categories.
To figure out the keystone price, multiply cost by 2. For a product costing $45 wholesale, the keystone retail price is $90. As a result, your gross profit is $45, covering overhead, labor, and contributing to net profit.