Markup Calculator
Amount added on top of cost to set the selling price, expressed as a % of cost.
Markup and margin are not the same thing. Confusing the two is the #1 pricing mistake retailers make.
- Formula
- (Price − Cost) ÷ Cost × 100
Worked example
- Selling price
- 100 SAR
- Cost
- 40 SAR
- Result
- 150.0%
How to read it
Markup is the amount added to cost, expressed as a percentage of cost. The defaults here — a SAR 40 cost sold at SAR 100 — are a 150% markup, and the same transaction is a 60% margin. Both describe the same SAR 60, measured against different numbers: markup divides by cost, margin divides by price. Markup is the number you work with when you are setting a price from a cost sheet; margin is the number you report. Doubling cost — the old keystone rule — is a 100% markup and a 50% margin.
Common mistake
Applying a target margin as if it were a markup. A buyer told to hold 40% margin who adds 40% to a SAR 40 cost prices the item at SAR 56, which is a 28.6% margin — more than eleven points short, on every unit, for the life of the line. The conversion is not optional: a 40% margin needs a 66.7% markup. The second trap in Saudi Arabia is marking up a VAT-inclusive price. VAT is not yours, and a markup set on top of it overstates what you actually keep.
What to do about it
Work backwards from the margin you need rather than forwards from the cost. Price = cost ÷ (1 − margin), so a SAR 40 cost at a 60% target margin prices at SAR 100. Do it on the net price, strip VAT first, and set the price before you commit the order — a cost price you have already accepted leaves you arguing with the market instead of the supplier.
Questions
What is the difference between markup and margin?
Same money, different denominator. Markup measures the difference against cost; margin measures it against the selling price. A SAR 40 cost sold at SAR 100 is a 150% markup and a 60% margin. Markup is always the larger number, and the gap widens as the margin rises.
How do I convert a target margin into a markup?
Markup = margin ÷ (1 − margin). A 40% margin needs a 66.7% markup, a 50% margin needs 100% — the keystone rule of doubling cost — and a 60% margin needs 150%. Going the other way, margin = markup ÷ (1 + markup).
Should markup be calculated on the VAT-inclusive price?
No. Strip VAT out first and set the markup on the net price. At the Saudi standard rate of 15%, a SAR 115 shelf price is SAR 100 net — the 15 riyals are collected for ZATCA and were never yours to mark up.