How to calculate a percentage markup from your cost is usually done wrong.

Most people do it this way…

If they want to mark something up 40%, most will multiply their cost by 1.40. Or, multiply their cost by 40% then add that number to their cost.

Same thing.

So, if they pay $5.00 for a product, they multiply $5.00 X 1.4 which would give me $7.00.

Ok, if they sell the product for $7.00, they would make a 40% profit.

WRONG!!!

To prove this, multiply $7.00 X 40%. You get $2.80. Subtract that from $7.00 and you should get your cost of $5.00. But, you don’t. You get $4.20 which is below your cost.

However, there is a simple formula for doing this the right way.

Let’s say your cost for a product is $5.00. You want to sell it at a 30% markup. You subtract the .30 from 1.00 and get .70.

You then divide the $5.00 by .70 and get $7.15. You can test this by subtracting 30% from $7.15 which is $2.15 and you get $5.00.

$7.15 X 30% = $2.15 then $7.15 – $2.15 = $5.00 or simpler $7.15 X .70 = $5.00

I know that’s a lot of numbers and I don’t want to confuse you, so use the formulas below to make it easier to compute percentage markup.

These are used with the starting costs.

For a 15% profit, divide the cost price by 0.85

For a 20% profit, divide the cost price by 0.8

For a 25% profit, divide the cost price by 0.75

For a 30% profit, divide the cost price by 0.7

For a 40% profit, divide the cost price by 0.6

For a 50% profit, divide the cost price by 0.5

## 3 Responses

You also have to add in the initial shipping cost for the product.

Example you purchased 10 items from ST shipping was $10.00. Cost per item is $1.00.

So, your $7.15 item is now $8.15. If you want your 30% profit from that $5.00 item.

The cost in the example included the shipping cost. Shipping should be included in the cost, not added after you figure your markup.

Thanks Michael