What is a good markup percentage for a product?

It depends on your industry and cost structure. Retail typically starts at 50%–100% (keystone). Wholesale runs 50%–100% on production cost. Restaurants use 200%–400% on food cost. The right markup is the one that covers your true cost, your overhead, and your profit target — and still produces a competitive price. Use the industry benchmarks page to find the range for your category.

How do I calculate the selling price for my product?

Selling Price = True Cost × (1 + Markup% / 100). First, calculate your true landed cost (invoice + freight + packaging + fees). Then apply a markup percentage that covers overhead and profit. Use the calculator at the top of this page to run the numbers instantly.

How much should I mark up a product to make a profit?

At minimum, your markup needs to cover: (1) the gap between variable cost and true landed cost, (2) your fixed overhead allocated per unit, and (3) your target profit per unit. A simple rule: if overhead is 25% of revenue and you want 10% net profit, you need at least 35% gross margin — which requires a 53.8% markup.

How do I know if my current price is too low?

Three signals: (1) your gross margin is below the industry benchmark range, (2) you're always busy but never profitable, (3) customers rarely push back on price. If any of these apply, run the health check diagnostic above. The most common cause is underestimating true cost — especially freight, fees, and returns.

Should I raise my prices?

If your markup is below the industry floor, yes — almost certainly. If you're within range but at the bottom, test a 10%–15% increase on new customers and measure conversion impact. Most businesses that have never done a formal pricing review find they can raise prices 10%–20% with minimal volume loss, because they've been underpricing relative to their actual value.

What is the difference between markup and margin?

Markup divides profit by cost. Margin divides profit by selling price. A 50% markup equals a 33.3% margin. A 50% margin requires a 100% markup. They are related but not interchangeable — using them interchangeably is how pricing errors compound across an entire catalog. Use the markup vs margin converter to translate between them instantly.

Why is my markup percentage higher than my margin percentage?

Because they use different denominators. Markup uses cost as the base (smaller number), which makes the percentage larger. Margin uses selling price as the base (larger number), which makes the percentage smaller. For the same product, markup will always be a higher percentage than margin. This is not an error — it's how the math works.

Pricing Guide

How to Price a Product

A step-by-step framework with live calculators — from first-time founders to full catalog repricing.

🚀

I'm pricing a product for the first time

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I want to check if my current price is right

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I keep confusing markup and margin

Pricing is not about what you want to charge. It's about what you need to charge to survive — and what your customer is willing to pay. The job is to find where those two numbers overlap.

Most pricing mistakes are not calculation errors. They are framing errors: people price based on what feels right, what competitors charge, or what they think customers expect — without ever calculating the minimum price that keeps the business alive.

This page fixes that. Start with the math. Then layer in the market.

Live Calculator

Start With Your Numbers

Enter any two values. The calculator fills in the rest.

Instant Markup Engine

Edit any two values. The rest recalculate in real time.

Live

Use cost + markup to price products in one move.

Recommended driver fields: Cost Price + Markup %.

Cost Price$

Markup %%

Selling Price$

Profit$

Gross Margin %%

CurrencyPrecision

Selling Price

$155

Gross Margin

35.48%

Profit

$55

Source Pair

Markup % + Cost Price

Cost vs Profit mix

Total

$155

65% cost

Cost

Profit

✅ Your markup fits the Retail Clothing range (50% - 100%).

⚠️ Your margin is below the Retail Clothing midpoint margin (42.9%).

💡 To reach 40% margin, set markup to 66.7%.

Not sure what markup % to use? Work through the cost breakdown below first — it will tell you the minimum markup you need before you pick a number.

Framework

The 3-Step Framework for Pricing Any Product

Skip any of these three steps and your price is a guess. Do all three and it's a decision.

Step 1

Calculate Your TRUE Cost

Step 2

Calculate the Minimum Markup You Need

Step 3

Check the Market

Step 1

Calculate Your TRUE Cost (not just what you paid for it)

Most people calculate cost wrong. They take the invoice price and stop there. But the real cost of bringing a product to market includes every dollar that moves because of that product: freight, packaging, payment processing, returns and defects, and, if you make it yourself, the value of your time.

A product with a $20 invoice cost might have a true landed cost of $26–$28 once you add freight ($2), packaging ($1.50), payment fees ($0.70), and a 3% defect/return allowance ($0.60). If you markup the $20 invoice price instead of the $27 true cost, your actual margin is dramatically lower than you think.

Cost Component	Example	Include?
Product / invoice cost	$20.00	✅ Always
Inbound freight & shipping	$2.00	✅ Always
Import duties / tariffs	$0.00–$3.00	✅ If applicable
Packaging & labeling	$1.50	✅ Always
Payment processing fees	~2.9% of sale price	✅ Always
Returns & defect allowance	~2%–5% of units	✅ Always
Storage / warehousing	Varies	✅ If applicable
Your time (if handmade)	Hourly rate × hours	✅ If applicable

Rule of thumb: Add 15%–30% to your invoice cost to estimate true landed cost. If you're in e-commerce with returns, add another 3%–5%.

Step 2

Calculate the Minimum Markup You Need

Once you know true cost per unit, you need to know how much gross profit each sale needs to generate to keep the business running. This is not about greed — it is about math. Gross profit per unit needs to cover fixed overhead allocated per unit, plus target net profit.

If fixed overhead runs $5,000/month and you sell 500 units/month, each unit needs $10 toward overhead before profit. If true cost is $27 and you need $10 overhead plus $3 profit per unit, your minimum selling price is $40 — a 48% markup. Anything below that means subsidizing customers with your own money.

Minimum Markup % =
  (Overhead per unit + Target profit per unit)
  ÷ True cost per unit × 100

Worked example: true cost $27.00, overhead per unit $10.00, target profit $3.00. Minimum markup = ($10 + $3) / $27 × 100 = 48.1%. Minimum selling price = $27 × 1.481 = $40.00.

This is your floor. You should never price below this number. Now go check what the market will bear.

Step 3

Check the Market (find your ceiling)

Your cost-based floor tells you the minimum. The market tells you the maximum. The gap between them is your pricing power, and how wide that gap is depends almost entirely on how differentiated your product is.

If you sell a commodity, your ceiling is close to your floor because alternatives are easy to find. If you sell something differentiated, your ceiling can sit far above your floor. Marketing widens that gap. Pricing captures it.

[Your Cost Floor] ←————— Your Pricing Power ————→ [Market Ceiling]
$40 $65
↑ Price here based on your differentiation

If competitors charge $42–$48 and your floor is $40: price at $44–$46, test higher.
If competitors charge $35 and your floor is $40: you have a cost problem, not a pricing problem.
If competitors charge $80 and your floor is $40: you may be underestimating your product's value.

Methods

4 Ways to Price a Product — Which One Is Right for You?

These are not competing philosophies. Most businesses use all four at different stages. Here's when each one applies.

Method	The Logic	Best Situation	The Risk	Markup Site Tool
Cost-Plus	Add a fixed % on top of true cost	You know your costs well; need a reliable floor	Ignores what market will bear; can leave money on table	Markup Calculator
Competitive	Match or undercut competitors	Commodity products; high price transparency	Ignores your cost structure; can price below your floor	Industry Benchmarks
Keystone	Always price at 2× cost	Boutique retail; gift; specialty; low price transparency	Too high for electronics/grocery; too low for jewelry/luxury	Keystone Pricing
Value-Based	Price based on customer's perceived value	Unique products; strong brand; B2B solutions	Hard to measure; requires customer research	Pricing Strategy Guide

Which should you use? Start with Cost-Plus to find your floor. Use Competitive to find your ceiling. If your product has real differentiation, test Value-Based above the competitive ceiling. Use Keystone as a quick sanity check for retail.

Pricing Health Check

Is Your Current Price Right? Run a Diagnostic.

If you're already selling, this tool tells you whether your price is covering your costs, how you compare to your industry, and where the problem is if you're underperforming.

Pricing health check

Use the benchmark as context, not a hard rule. The goal is to know whether your pricing sits below range, inside range, or above the sector average.

My industry

Choose a benchmark

Select the closest industry to compare your markup against the benchmark range.

My cost

My selling price

Or enter markup directly

The health check uses markup for comparison and also shows the equivalent margin so you can cross-check with the markup vs margin guide.

Need to benchmark more than one SKU?

Use the bulk markup calculator when you want to apply industry context across a full pricing sheet.

Open Bulk Calculator

If you're below the benchmark range:

You're either underpricing (most common) or your cost structure is genuinely higher than industry average. First, verify your true landed cost includes all components. If cost is correct, raise prices or reduce costs before this business model is viable.

If you're within the benchmark range:

You're in a healthy zone. The next question is whether you are at the top or bottom of the range. Products with stronger differentiation should be at the top. Commodities sit at the bottom.

If you're above the benchmark range:

Either your product commands a premium or you're overpriced and losing customers to competitors. Check conversion rate and cart abandonment data.

Business Type

Pricing Starting Points by Business Type

The right markup depends on your cost structure, not just your category. Here are realistic starting points for four common business models.

Physical Product (Retail)

Landed cost multiplier: 1.5×–2.5× (50%–150% markup). Keystone (2×) is the default starting point for boutique and specialty retail.

Target gross margin: 40%–60%. Red flag: gross margin below 30% in brick-and-mortar means overhead will usually kill you.

Invoice cost: $18, freight: $2, packaging: $1, fees: $0.60 → True cost: $21.60. Keystone price: $21.60 × 2 = $43.20. Gross margin: 50%. Market check: competitors at $38–$46 → $43 is competitive ✅

Wholesale

Your wholesale price = your production cost × 2–3 (100%–200% markup on production cost). Your retailer needs room for their own keystone price.

Target gross margin at wholesale: 40%–55%. Red flag: if your wholesale price × 2 is uncompetitive at retail, your production cost is too high.

Production cost: $12. Your wholesale price: $12 × 2 = $24 (100% markup, 50% margin). Retailer's keystone retail price: $24 × 2 = $48. Market check: similar products retail at $45–$55 → $48 works ✅

Handmade / Craft

Cost must include your time at a real hourly rate, minimum $20–$25/hr, not minimum wage. Formula: (Materials + Labor) × 2 = wholesale; wholesale × 2 = retail.

Target gross margin: 50%–70%. Red flag: if your retail price is uncompetitive when you include your time, the production method may not be viable.

Materials: $8, time: 45 min at $25/hr = $18.75 → True cost: $26.75. Wholesale: $26.75 × 2 = $53.50. Retail: $53.50 × 2 = $107. If the product is not worth $107 to your target customer, reduce production time or reposition.

Services

Hourly rate = (Annual income target + Business expenses) ÷ Billable hours per year. Markup applies to hard costs, not to your own time.

Target net margin for service businesses: 15%–30%. Red flag: if you are billing hourly and always fully booked, your rate is too low.

Income target: $80,000/yr, expenses: $20,000/yr, billable hours: 1,000/yr. Minimum hourly rate: ($80,000 + $20,000) ÷ 1,000 = $100/hr. Add 20% buffer: $100 × 1.2 = $120/hr.

Mistakes

3 Pricing Mistakes That Are Costing You Money Right Now

These are not theoretical. They show up in almost every business that hasn't done a formal pricing review.

Mistake 1: You're Marking Up the Invoice Price, Not the True Cost

The gap between invoice cost and true landed cost is typically 15%–30%. If you markup $20 invoice cost at 50%, you get $30. But if true cost is $26, actual markup is only 15.4%. Fix: calculate markup on true landed cost. Include freight, packaging, fees, and defect allowance before markup %.

Mistake 2: Your Team Is Using Markup and Margin Interchangeably

A 40% markup is not a 40% margin. It is a 28.6% margin. If finance sets a 40% gross margin target and buying applies 40% markup, every product is underpriced. Fix: decide whether the team speaks in markup or margin, then use the markup vs margin converter to translate.

Mistake 3: You're Pricing to Match Competitors Without Knowing Their Cost Structure

A competitor charging $49 might have a production cost of $8 or $35. You do not know. Competitor prices tell you what the market accepts, not whether that price is profitable for you. Fix: calculate your floor first, then use competitor prices as a ceiling reference.

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