What is markup?
Markup is the amount added to the cost of a product or service to arrive at its selling price, usually expressed as a percentage of the cost.
What markup means
Markup is a pricing method. You start with what something costs you and add a percentage on top. If a product costs £40 and you apply a 50% markup, you add £20 and sell it for £60.
Markup = (selling price − cost) ÷ cost × 100
Selling price = cost × (1 + markup)
It is popular in retail, wholesale and trades, where costs are known and a consistent uplift keeps pricing simple.
Markup vs margin
Markup and margin use the same profit figure but divide it by different things. Markup divides by cost; margin divides by the selling price. So the same sale always shows a higher markup than margin.
| Markup | Equivalent margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
Example
An electrician buys a consumer unit for £120 and marks up materials by 30%, charging £156. Labour is priced separately.
The owner believes they make 30% on materials. In fact the margin is £36 ÷ £156 = 23%. If their overheads plan assumes a 30% margin on materials, they are about £1,000 short for every £15,000 of materials sold. To earn a true 30% margin, the price should be £120 ÷ 0.7 = £171.43, which is a 42.9% markup.
Why it matters for your business
Confusing markup with margin is one of the most common pricing mistakes in small businesses. Budgets, break-even calculations and management accounts usually work in margins, so if you price using markup, convert it before comparing. Make sure "cost" includes everything that goes into the sale, such as delivery, packaging and card fees, not just the supplier price.
If you are VAT registered, apply markup to the cost excluding VAT and add VAT on top of the final price.
Setting prices with markup
Markup is a starting point, not the whole answer. Check the resulting price against what competitors charge and what customers will pay. A low-cost item can often carry a much higher markup than an expensive one, and products that need more handling, storage or after-sales support should carry more than those that sell themselves. Review markups whenever supplier prices change, otherwise margin erodes quietly as costs rise and your prices stay the same.
Common questions
Margin = markup ÷ (1 + markup). A 50% markup is 0.5 ÷ 1.5 = 33.3% margin. To go the other way, markup = margin ÷ (1 − margin), so a 40% margin needs a 66.7% markup.
Enough to cover your direct costs, a fair share of overheads and the profit you need. Retailers often mark up 50% to 100% or more, trades commonly 15% to 40% on materials. Work backwards from the margin your business needs rather than copying a standard figure.