What is markup?

Markup (definition)

Markup is what you add to prices in order to make money. It’s expressed as a percentage.

Many businesses set their prices by working out what it costs to provide goods and services, then marking up that amount by a percentage.

The cost of goods or services sold times markup, plus the cost of goods or services sold, equals the sale price.

Markup is entered as a decimal. For example, a 35% markup is shown as 0.35

Your markup determines how much money you make on each sale. It ends up being your gross profit. A low markup may leave you with too little cash to run the business and turn a profit. Too high of a markup can turn customers off.

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This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.