Mark-up & Gross Profit Percentage

Mark-up is the amount you add to the cost to get the retail price. Let's say that you mark up an item for which you pay $3.00 by 50%. Convert the percentage to a the decimal form 0.50 and multiply $3.00 by 1.50 to get $4.50. Your mark-up is 50% because you increased the cost by 50% to get the retail price.

Following through with the same example, now we look at this in reverse. When you sell the item for $4.50 with a cost of $3.00, then you have a profit of $1.50 on a sale of $4.50. The gross profit percentage is 1.50/4.50 = 0.33 or 33%.

When you have the item, know what gross profit percentage you want, know the cost, this is the procedure to find the mark-up percentage.

Subtract the decimal form of the gross profit percentage from 1.00.

EXAMPLE: 1.00 - 0.33 = 0.67

Divide 1.00 by the result in step one.

EXAMPLE: 1.00 / 0.67 = 1.49

Multiply the result in step two by the cost to get the retail price.

EXAMPLE: 1.49 X $3.00= $4.50

Or, use this worksheet:

1. Enter 1.00

 

2. Enter the gross profit percentage you want in the form of a decimal (0.50, not 50%).

 

3. Subtract line 2 from line 1.

 

4. Divide 1 by the amount in line 3.

 

5. Enter the cost of the item.

6. Multiply line 4 by line 5. This is your sale price.

Expressed algebraically, where "M" is the multiplier and "G" is the gross profit percentage desired, then:

M = 1/(1-G)

This is a chart of the most commonly used mark-up percentages. To mark something up 50% remember that you multiply it by 150%. To mark something up 200%, you multiply it by 300%.

A markup of...

will give you a gross profit percentage of...

25%

20%

33%

25%

40%

28%

50%

33%

75%

43%

100%

50%

150%

60%

200%

67%

300%

75%

top