Markup
Learn what markup is, how to calculate it, and how it differs from margin when you set your prices.
Published Wednesday 30 September 2026
Table of contents
Markup is entered as a decimal. For example, a 35% markup is shown as 0.35
Key takeaways
- Markup is the amount you add to your cost to set a selling price, shown as a percentage of cost
- Markup percentage equals selling price minus cost, divided by cost, then multiplied by 100
- Markup is measured against cost while margin is measured against selling price, so the same sale gives two different percentages
- The right markup covers every cost of running your business and still suits what customers will pay
What is markup?
Markup is the amount you add to the cost of a product or service to set its selling price. It’s usually expressed as a percentage of that cost.
The word also describes HTML and document markup, but this page covers pricing.
Many businesses set prices by working out what it costs to provide their goods or services, then adding a percentage on top. For products, that starting point is usually your cost of goods sold. Think of markup as the gap between what you pay your supplier and what your customer pays you.
When you use markup in a formula, you enter it as a decimal. For example, a 35% markup is shown as 0.35.
Your markup decides how much money you make on each sale. Added up across all your sales, it becomes your gross profit.
Markup formula
The markup formula compares your profit on a sale with what the item cost you. The Corporate Finance Institute sets out the standard version below.
Markup % = (selling price − cost) ÷ cost × 100
If you already know the markup you want, you can work backwards to a selling price. Enter the markup as a decimal and use this version instead.
Selling price = cost × (1 + markup as a decimal)
How to calculate markup
You can work out the markup on any product in four steps. Follow them in order using the figures from your own records.
- Add up the total cost of one unit, including purchase price, freight and packaging
- Subtract that cost from the selling price to find your markup amount
- Divide the markup amount by the cost
- Multiply the result by 100 to get your markup percentage
Say a bag of coffee beans costs you Rp 70,000. A 20% markup gives a selling price of Rp 70,000 × 1.2 = Rp 84,000, so you make Rp 14,000 per bag.
A 40% markup on the same bag gives Rp 70,000 × 1.4 = Rp 98,000, which puts Rp 28,000 in your pocket per sale. To test other prices quickly, try the Xero markup calculator.
Markup vs margin
Markup and margin both describe the profit on a sale, but they divide it by different numbers. Markup divides profit by cost, while margin divides profit by the selling price.
Take a product that costs Rp 70,000 and sells for Rp 100,000, leaving Rp 30,000 profit. Your markup is Rp 30,000 ÷ Rp 70,000 = 42.9%, and your margin is Rp 30,000 ÷ Rp 100,000 = 30%.
Because cost is always smaller than price, markup is always the higher of the two figures. Knowing your profit margin as well helps you see how much of each sale you keep.
How to choose the right markup
The right markup balances what your business needs to earn with what your customers are happy to pay. A low markup may leave you with too little cash to run the business and turn a profit, while too high a markup can turn customers off.
These habits help you set a markup that holds up over time:
- Include hidden costs such as delivery, packaging and payment fees in your cost price
- Set a separate markup for each product or product group instead of one rate for everything
- Review your markup whenever supplier prices or other costs go up
- Compare your prices with what similar businesses charge in your area
Price your products with confidence using Xero
A good markup starts with accurate costs, and Xero keeps them organised in one place. Easy-to-read reports and performance tracking show which products earn the most, so you can adjust prices with confidence.
You’ll also have the numbers you need to measure profitability across your whole business. Try Xero today and get one month free.
FAQs on markup
Here are quick answers to common questions about markup percentages.
What does a 5% markup mean?
A 5% markup means your selling price is 5% higher than your cost. On an item that costs Rp 70,000, you’d add Rp 3,500 and sell it for Rp 73,500.
What does a 100% markup mean?
A 100% markup means you double your cost to set the price, so a Rp 70,000 item sells for Rp 140,000. That same sale gives you a 50% margin.
Can markup be more than 100%?
Yes, because markup is measured against cost, it has no upper limit. Selling a Rp 70,000 item for Rp 175,000 is a 150% markup, while margin always stays below 100%.
Is markup the same as gross profit?
They’re closely linked, but markup is usually a percentage of cost for one item, while gross profit is a rupiah amount for the whole business. Gross profit is your total revenue minus your cost of goods sold over a period.
Related terms
Learn more about markup
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Disclaimer
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.