Wholesaler, Drop Shipper, Manufacturer Self Defense Products

How To Figure Percentage Mark Up Correctly

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 thoughts on “How To Figure Percentage Mark Up Correctly”

  1. steve Rodriguez

    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.

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

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