Markup — The percentage added to a product’s cost price to arrive at its sale price.
What Is Markup?
If a product costs $20 and you apply a 60% markup, the sale price is $32. That same $20-to-$32 jump only works out to a 37.5% profit margin — the two numbers describe the same price increase from different starting points, which is the most common point of confusion between them.
How to Calculate Markup
Formula: (Sale Price − Cost) ÷ Cost × 100.
Markup vs. Profit Margin
| Markup | Profit Margin | |
|---|---|---|
| Measured against | Cost price | Sale price |
| Formula | (Price − Cost) ÷ Cost | (Price − Cost) ÷ Price |
| Typical use | Setting a price | Tracking profitability |
Markup Example
A supplier charges $15 for a product, and you want an 80% markup: $15 + (0.80 × $15) = $27 sale price.
FAQ
Is a 50% markup the same as a 50% margin?
No — a 50% markup works out to a 33.3% margin, because markup is calculated on cost while margin is calculated on the sale price.
What markup do dropshippers typically use?
It varies a lot by niche, but many dropshippers price with a markup of 100% or more to leave room for advertising costs.
How do I convert markup into margin?
Margin = Markup ÷ (100 + Markup) × 100, when markup is written as a percentage.