Markup
Learn what markup is, how it differs from margin, and how to set prices that cover your costs.
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 percentage you add to cost to set a selling price
- Markup is measured against cost, while margin is measured against the selling price
- The markup on each sale adds up to your gross profit, which has to cover your overheads
- In Ireland, you apply markup to net figures and add VAT at the correct rate afterwards
What is markup?
Markup is the amount you add to the cost of something to set its selling price, shown as a percentage of that cost. If a candle costs you €10 to make and you sell it for €15, your markup is 50%.
You'll also see the word used for code that formats web pages. This page covers the pricing meaning only.
How markup works
Many businesses set prices by working out what it costs to provide their goods or services, then adding a percentage on top. The formula uses cost as its starting point:
Selling price = cost × (1 + markup)
You enter the markup as a decimal, so a 35% markup becomes 0.35. If a case of coffee beans costs you €40, a 35% markup gives a selling price of €40 × 1.35 = €54.
The full markup calculation walks through working backwards from a price, plus the slip-ups to watch for.
Markup vs margin
Markup and margin both describe the profit on a sale, but they measure it against different numbers. Markup divides the profit by the cost, while margin divides it by the selling price.
Say you buy a jacket for €60 and sell it for €100. The €40 profit is a 66.7% markup on cost and a 40% margin on the price, which is your gross profit margin for that sale.
To convert a markup into a margin, use this formula:
Margin = markup ÷ (1 + markup)
Here's how common markups translate into margins:
- A 25% markup equals a 20% margin
- A 50% markup equals a 33.3% margin
- A 100% markup equals a 50% margin
- A 150% markup equals a 60% margin
Markup multipliers and keystone markup
Some retailers skip percentages and multiply cost by a set number instead. A multiplier of 2 doubles the cost, which equals a 100% markup and is known as keystone markup or keystone pricing.
To turn any multiplier into a markup, subtract 1 and convert it to a percentage. A 2.5× multiplier gives a 150% markup, so a scarf that costs you €20 would sell for €50.
Why markup matters for your business
Your markup decides how much you earn on each sale. Across all your sales, that money adds up to your gross profit, which is revenue minus the cost of goods sold.
Gross profit then has to cover your overheads, such as rent and insurance, before anything is left as net profit. The right markup keeps enough cash coming in to run the business and still turn a profit.
Set it too low and you may have too little cash for those running costs. Set it too high and customers may buy elsewhere, so aim for a markup that suits both your books and your buyers.
What affects the markup you set
The right markup differs between businesses. It depends on your costs and your market, and it should fit your wider pricing strategy.
These factors shape the markup you choose:
- Direct costs, such as materials and stock
- Overheads that your gross profit needs to cover
- Competitor prices for similar products or services
- Perceived value, which lets strong brands or specialist skills charge more
- Industry norms, since typical markups vary between sectors
- Product type and stock turnover, because fast sellers can carry a lower markup than slow sellers
Knowing your marginal cost helps too, since it shows what one extra unit costs you to produce. That tells you the lowest price that still adds to your profit.
Markup and VAT in Ireland
In Ireland, you work out your markup on net figures, meaning cost and price before value-added tax (VAT). You then add VAT on top at the rate that applies to what you sell.
According to Revenue's current VAT rates table, effective from 1 January 2026, the standard rate is 23%, with reduced rates of 13.5% and 9%. The rate you charge depends on the specific goods or service.
For a product with a €50 net cost, a 40% markup and VAT at the standard rate, the steps are:
- Multiply the €50 net cost by 1.4 to get a €70 net selling price
- Multiply €70 by 1.23 to add VAT at 23%
- Charge your customer €86.10, which includes €16.10 VAT
Working from net figures keeps VAT out of your markup, so your profit reflects only what you earn.
Price with confidence using Xero
A well-set markup means every sale helps cover your costs and build profit. Checking it regularly lets you adjust prices as your costs change.
Xero's real-time financial reports show your costs and gross profit in one place, so you can see how your pricing performs. To try it with your own figures, you can get one month free.
FAQs on markup
Here are quick answers to common questions about markup.
What does a 40% markup mean?
A 40% markup means your selling price is 1.4 times your cost, so an item that costs €100 sells for €140. That works out to a margin of about 28.6%.
What is markup in accounting?
In accounting, markup is the gross profit on a sale shown as a percentage of the cost of goods sold. Accountants sometimes call it markup on cost to separate it from margin.
Can markup be more than 100%?
Yes, markup has no upper limit, so selling a €5 item for €20 gives a 300% markup. Margin works differently and always stays below 100%.
Should you include overheads in your markup?
You apply markup to direct costs, but the percentage should be high enough for your total gross profit to cover overheads. One quick check is to divide your yearly overheads by the units you expect to sell and make sure each unit's markup covers that share.
Is a higher markup always better?
The best markup balances profit per sale with how much you sell. A lower markup on fast-moving stock can bring in more gross profit overall than a high markup on items that rarely sell.
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.