Markup calculator for small and growing businesses

Understanding how to price your products or services is one of the most important steps to building a successful business. Whether you’re just starting out or scaling up, this free markup calculator makes it simple to work out your markup percentage.

What does the Markup calculator show?

QuickBooks’ markup calculator helps you work out how much you’re charging above the cost of your product or service so you can price confidently, stay competitive, and protect your profits. This tool is ideal for freelancers, sole traders, and small business owners who want a quick and easy way to test different pricing strategies, by taking the guesswork out of pricing to help you make confident, data-backed decisions.

What is Markup Percentage?

Markup percentage is a key pricing metric that shows how much your business has added to the cost of a product to reach its selling price. It is expressed as a percentage and helps you understand your profit on each item sold. You can use the following formula to calculate your markup percentage:

Markup % = [(Selling Price - Cost price) / Cost Price] x 100.

Confused? Here’s an example of how the markup percentage formula works in the real world.

Imagine you run a business that sells durable phone cases. The cost to your business for purchasing each case is £10, and you sell them to your customers for £15. The formula would then be:

Markup % = [(£15 - £10) / £10] x 100 = 50%.

It's important to note that markup is not the same as profit margin. While both measure profitability, markup focuses on how much more you're charging compared to cost, whereas margin looks at profit as a percentage of the final selling price.

Using markup percentage helps you set prices that cover your costs and keep your business sustainable, especially if you’re managing multiple products or services and need a consistent approach to pricing.

What is a typical Markup Percentage?

The ideal markup percentage varies by industry and the type of business you run. For many industries, a markup of 50% to 100% is common, while wholesalers typically have smaller markup percentages. Some businesses may use a different method to calculate markup percentage when other financial factors such as the hourly rates of staff or project fees need to be included in this percentage, for example companies in the service industry.

It is important to remember that markup isn’t profit, as this amount needs to also cover your overheads like rent, salaries, marketing, and tax before you can see any true earnings.

Markup Percentage examples

Understanding how markup works in the real world can help you price your products or services more strategically. Whether you’re selling physical goods or offering your time and expertise, applying markup correctly ensures you’re covering costs and earning a profit. 

In this section we have provided some real-world examples of markup percentages.

Retail business example

Imagine you run a small boutique and have just purchased a designer jacket from a wholesaler for £40. You want to apply a 75% markup to cover your costs and make a profit. In this instance, your markup cost formula would be as such:

Markup % = [(Selling Price – Cost Price) ÷ Cost Price] × 100

But how do you get the price for a 75% markup? In order to do this you would need to work backwards:

Using this result, you would list the jacket at £70, giving you a profit of £30 per unit sold. This profit margin should help to cover other expenses such as rent, packaging, and marketing whilst still generating an income.

Service business example

Service businesses will operate slightly different than other traditional business models, and may require the owner or accountant to factor in variables such as hourly rates into their markup percentage. Let’s say you are a freelance web designer charging for a website build, and you want to factor in the cost of your time and any additional expenses like software licenses or subcontractors.

• You estimate the job will take 15 hours of your time. 

• You pay yourself £30/hour, making your base labour cost £450.

• You also need to purchase a premium plugin for £50, bringing the total cost to £500.

You decide on a 60% markup to ensure you are making a healthy return on your time and expertise, and use the following formula:

• Selling Price = £500 x (1 + 0.60) = £800

In this case you would quote £800 for the project, earning a profit of £300. This not only covers your time but also accounts for the value you bring, business admin, and potential revisions.

These examples show how markup can be adapted for different types of businesses. Whether you're pricing tangible products or billing for services, understanding your costs and applying the right markup ensures your business stays profitable and sustainable.

What is the difference between Markup Percentage and Gross Margin?

Although markup percentage and gross margin are closely related pricing metrics, they measure profitability from two different angles. As such, mixing them up will likely lead to confusion, especially when setting prices or analysing your business’ performance. Below we have assessed these 2 terms using the figures from the previous boutique retail business as an example.

Markup percentage

Markup percentage is based on the cost price of a product, telling you how much more you’re charging above the cost of the item. It is particularly useful when you are setting prices and want to ensure  you are covering expenses and generating a profit.

Let’s take the example of a small boutique that buys a designer jacket from a wholesaler for £40. To make a healthy return, you apply a 75% markup:

• Your profit on that sale is £30

• Your markup is: (£70 - £40) ÷ £40 = 75%

Markup percentage helps retailers work upwards from the cost to a price that supports profit and overheads.

Gross margin 

Gross margin is based on the selling price, representing the percentage of revenue that remains after accounting for the cost of goods sold (COGS). This metric is especially useful for measuring overall profitability and performance across your product range.

You would use the following formula to calculate gross margins:

• Gross Margin % = [(Selling Price – Cost Price) ÷ Selling Price] × 100

Using the jacket example:

• Gross Margin = (£70 – £40) ÷ £70 = 0.428 = 42.8% 

While your markup is 75%, your gross margin is only 42.8%. That’s a significant difference—and one that matters when you're analysing how profitable your pricing strategy is or comparing different product lines.

Why is Markup Percentage important?

Markup percentage is a key pricing tool for any business, whether you sell physical products or services. It plays a critical role in helping you ensure profitability, cover costs, and set sustainable prices that support your long-term growth. Without understanding your markup, you risk undercharging, eroding your profit margins, and struggling to scale your business effectively.

1. Markup percentage helps you price with confidence

One of the most practical reasons markup percentage matters is that it gives you a simple, consistent way to price your offerings. By applying a set markup to the cost of your goods or services, you can quickly determine a retail price that covers costs and generates a profit. This is especially useful for small businesses and startups where time and resources are limited.

For example, if a cafe wants to apply a 150% markup on all baked goods, and it costs £1.20 to make a slice of cake, they can confidently price it at £3 without second-guessing whether it is profitable.

2. Ensures you cover overheads and labour

Markup isn’t just about making a profit, it’s also about ensuring your business does not lose money. Every business has overheads like rent, wages, equipment, utilities, and admin. If your markup is too low, you may be covering the cost of the item but not the cost of running the business. This is particularly important for service-based businesses, as discussed above, where costs are more than just physical materials.

For instance, if you are a freelance graphic designer, you may charge £300 for a logo design. If it takes you six hours and you value your time at £40/hour, your cost is £240. Applying a markup of 25% would give you a price of £300 - which may be just enough to start generating a profit after paying yourself.

3. Supports better business planning

Understanding your markup percentage also helps with broader business planning, potentially allowing you to:

• Forecast revenue and profit more accurately

• Evaluate product performance by comparing markup across different lines

• Make smarter buying decisions by identifying suppliers that allow for healthier markups

• Plan for discounts or promotions while still maintaining profitability

4. Helps you stay competitive

Pricing too low might win you sales initially, but it’s not sustainable. Markup percentage keeps your prices grounded in real costs, helping you avoid the common mistake of undercharging - especially when competing with larger businesses.

At the same time, a healthy markup gives you room to offer occasional discounts or incentives without dipping into your own pocket.

5. Essential for profit tracking and reporting

If you’re using accounting software like QuickBooks, markup percentage can be a key metric for analysing the health of your business. It feeds directly into gross profit reporting and can help you spot trends over time - such as rising supplier costs or shrinking margins - that may require you to adjust pricing or rethink your product mix.

Markup Percentage FAQs

How is Markup Percentage used by retail businesses?

Retailers use markup percentage to determine how much to charge for products compared to their wholesale or production costs. By applying a consistent markup, they can ensure their prices cover operating costs and generate profit across a wide product range.

How can I adapt my Markup Percentage for tougher economic conditions?

When customer spending slows down, high markups may make your prices uncompetitive. You might reduce your markup slightly to boost sales—but be sure it still covers your costs and leaves room for profit. Use our calculator to test different scenarios and find the right balance.

How can I calculate Markup Percentage on individual product units?

To calculate markup on a single product, just take the unit’s cost and selling price and apply the formula:

Markup % = (Selling Price - Cost Price) ÷ Cost Price × 100

This is useful if you're pricing new inventory or want to evaluate the profitability of a particular product.

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