Markup is a ratio of profit to cost expressed as a percentage. Profit is a difference between the revenue and the cost. For example, when you buy something for
$80 and sell it for $100, your profit is $20. The ratio of profit ($20) to cost ($80) is 25%.
How to calculate markup?
The formula for markup is as follows:
markup = 100 * profit / cost. We multiply by 100 because we express it as a percentage, not as a fraction (
25% is the same as
When you don't know the profit, only how much we bought something for (cost) and sold it for (revenue), we simply substitute profit for the formula for profit.
Profit = revenue - cost, so
markup = 100 * (revenue - cost) / cost.
Go ahead and try to enter different numbers into the markup calculator above. Fill in any two fields and the 3rd one will be automatically calculated.
Markup vs. profit margin
It is easy to confuse markup with profit margin. Profit margin is a ratio of profit to revenue as opposed to markup's ratio of profit to cost. With profit margin, you compare your profit to the selling price, not the purchase price. In our example, we would compare $20 to $100, so profit margin equals 20%.