Markup
Learn what markup is, how to calculate it, and how it differs from profit margin.
Published Monday 31 August 2026
Table of contents
Markup is entered as a decimal. For example, a 35% markup is shown as 0.35
Key takeaways
- Markup is your profit shown as a percentage of the cost of a product or service.
- To work it out, use: Markup % = (selling price − cost) ÷ cost × 100.
- Markup is always larger than profit margin for the same sale, because it is based on cost rather than selling price.
- A good markup varies widely by industry, so compare your figure against typical patterns for your sector.
What is markup?
Markup is the percentage you add to the cost of a product or service to set its selling price. Put simply, it is your profit shown as a percentage of cost.
That added amount becomes your gross profit on the sale. Markup is often entered as a decimal, so a 35% markup is shown as 0.35.
How to calculate markup
You calculate markup by comparing the profit on a sale to what the item cost you. The formula is:
Markup % = (selling price − cost) ÷ cost × 100
Here is a worked example for a business that makes and sells sofas.
- Record the cost to make one sofa: ₱20,000.
- Record the selling price: ₱27,000.
- Subtract the cost from the selling price: ₱27,000 − ₱20,000 = ₱7,000.
- Divide by the cost and multiply by 100: ₱7,000 ÷ ₱20,000 × 100 = 35%.
You can run the formula in reverse to set a price from a target markup: selling price = cost + (cost × markup). For the same sofa, ₱20,000 + (₱20,000 × 0.35) = ₱27,000. To skip the manual maths, you can use a free markup calculator, or follow a step-by-step walkthrough on working out markup on any product.
What a markup percentage means
A markup percentage tells you how much you add on top of cost. A 20% markup means you add 20% of the cost to the cost, so an item costing ₱1,000 sells for ₱1,200.
The same logic applies at any rate. A 40% markup means an item costing ₱1,000 sells for ₱1,400.
Markup vs profit margin
Markup is profit as a percentage of cost, while profit margin is profit as a percentage of the selling price. For the same sale, markup is always the larger figure.
- A 50% markup equals a 33.3% gross margin
- A 100% markup equals a 50% gross margin
- Margin can never exceed 100%, but markup can be any positive percentage
For a fuller side-by-side comparison, see how the two measures differ and when to use each one.
How much should you mark up your products?
There is no universal “normal” markup. It varies widely by industry, and some sectors run markups as low as 5–10% with no single standard figure. These patterns give you a rough guide.
- Retail often uses 50% or more
- Consumer electronics often sits around 10–30%
- Restaurants and food service often mark up 100–300% on ingredients
- Professional services often charge 50–100% or more
A 50% retail markup is common enough to have its own name, keystone pricing. Revisit your markup when your costs rise, when new competitors enter your market, or when demand shifts. Treat these as general industry estimates, since local Philippine small-business markups may differ. To connect markup to your wider results, review how a healthy gross profit margin protects the bottom line.
Price with confidence using Xero
Setting the right markup is easier when you can see your true costs and margins in one place. Xero gives you a clear view of what each product costs and what it earns, so you can set markups that protect your profit. You can get one month free and see how better data leads to smarter pricing.
FAQs on markup
These quick answers cover the questions small business owners ask most often about markup.
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a ₱100 cost gives a ₱150 selling price, which is a 33.3% margin.
What is a good markup percentage?
It depends on your industry and costs: retail often runs 50% or more, electronics around 10–30%, and food service above 100%.
Can markup be negative?
Yes, if you sell below cost, as in a clearance sale, but a sustained negative markup leads to losses.
How is markup different from a discount?
Markup adds to your cost to set a selling price, while a discount reduces a price that is already set.
Related terms
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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.