Markup vs Margin Calculator
Set a target margin or markup and get the exact price to charge
Updated 2026-09-09
- Price to charge
- $16.67
- Profit per unit
- $6.67
- Equivalent markup
- 66.7%
Set the target you actually manage to, then price backwards from it.
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Markup and margin describe the same profit from two different angles, and confusing them is expensive. A retailer who applies a 40% markup thinking they have locked in a 40% margin has actually earned 28.6% — a shortfall that compounds across every SKU on the shelf. This converter prices your product backwards from whichever target you actually manage to.
The two formulas side by side
Markup = (price − cost) ÷ cost. Margin = (price − cost) ÷ price. Because the selling price is always larger than the cost, the markup percentage is always the larger of the two numbers.
Quick reference: a 25% markup is a 20% margin, a 50% markup is a 33.3% margin, a 100% markup (keystone pricing) is a 50% margin, and a 300% markup is a 75% margin. Margin can approach 100% but never reach it; markup has no ceiling.
Pricing backwards from a target margin
The formula that saves the most money is price = cost ÷ (1 − target margin). To hit a 45% margin on an item costing $22, you need $22 ÷ 0.55 = $40. Multiplying $22 by 1.45 would have given you $31.90 and a margin of just 31%.
Set the calculator to "target margin" and it applies that division for you, then shows the equivalent markup so you can talk to suppliers in their language.
Keystone pricing and when it breaks
Keystone pricing — doubling cost — is the traditional retail default and produces a clean 50% margin. It works when your handling costs are modest and your competitors do the same thing.
It breaks in three situations: heavy, bulky goods where freight dwarfs the item cost; commodity products where a nearby competitor or marketplace listing anchors the price; and high-touch items where fitting, assembly, or advice consumes hours you never recover. In each case, price from your true landed cost and your labour, not from a multiplier.
Setting category-level rules instead of pricing item by item
Pricing every SKU individually does not scale past a few dozen products. Most healthy small retailers set a target margin per category — accessories 60%, core hardware 35%, consumables 45% — and only price manually where a competitor or supplier forces the issue.
- Write the target margin for each category down where staff can see it
- Round the resulting price to a sensible ending rather than leaving $40.37 on the tag
- Review category targets when freight or supplier costs move more than a few percent
- Track realised margin after discounts, not just the shelf-tag margin
Discounts cost more margin than owners expect
A 20% discount on a product with a 40% margin does not cut your profit by 20% — it halves it. At a 30% margin, the same discount leaves a third of the profit standing. Before running a sale, work out the extra volume needed just to stand still: at a 40% margin, a 20% discount requires double the units to earn the same gross profit.
Keep the numbers in a spreadsheet
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Simple Profit & Loss (P&L) Statement Spreadsheet
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Quote / Estimate Template Spreadsheet
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Frequently asked questions
How do I convert a 50% markup to a margin?
Divide the markup by one plus the markup: 0.50 ÷ 1.50 = 33.3%. A 50% markup is a 33.3% margin.
How do I convert a 40% margin to a markup?
Divide the margin by one minus the margin: 0.40 ÷ 0.60 = 66.7%. A 40% margin needs a 66.7% markup.
Which one should I use to set prices?
Price from margin, because margin is what your profit-and-loss statement, your accountant, and your lender all speak in. Use markup only to communicate with suppliers who quote that way.
Can margin be more than 100%?
No. Margin is a share of the selling price, so it approaches 100% but never reaches it. Markup has no upper limit.
What is keystone pricing?
Doubling the cost price, which produces exactly a 50% margin and a 100% markup. It is a useful default for light, easy-to-handle retail goods and a poor one for bulky or commoditised items.
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