← Back to Glossary
Markup
Definition
Markup is the difference between the cost of a product and its selling price, expressed as a percentage of the cost.
Explanation
Markup = (Selling Price - Cost) / Cost × 100. A 50% markup on a $10 cost means selling at $15. Markup differs from margin: same numbers give different percentages (a 50% markup equals a 33% margin).
Setting the right markup requires understanding costs, market demand, competitor pricing, and target profit. Common markups vary by industry: retail 50-100%, restaurants 200-300%, electronics 10-30%.
Example
A retailer buys a shirt for $20 and sells at $50. The markup is 150% (($50 - $20) / $20 × 100). The profit margin is 60%.