Markup
The amount added to the cost price of goods to cover overhead and create a profit.
Definition
Markup is the percentage amount that a retailer adds to the wholesale cost of a product to determine its final selling price.
Why It Matters
Markup ensures that a business can cover its overhead costs (like rent, employee salaries, and marketing) and still make a profit on every item sold.
Crucial Warning: Markup is NOT the same thing as margin!
Confusing these two terms is one of the most expensive mistakes a business owner can make. Markup calculates profit as a percentage of your cost. Margin calculates profit as a percentage of your revenue. A 100% markup only yields a 50% profit margin.
Practical Example
Calculating Markup
You buy a blank t-shirt from a supplier for $10.
- If you apply a 50% markup: 50% of $10 is $5. Your selling price is $15.
- If you apply a 100% markup: 100% of $10 is $10. Your selling price is $20.
To safely price your products without messing up the math, use our Markup and Margin Calculator.
Frequently Asked Questions
Is 100% markup the same as 100% margin?
No. A 100% markup means you doubled the cost of the item, which results in a 50% profit margin.
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