Price it right, and know your real margin.
Enter your unit cost and the markup you want. See the selling price, the profit per unit, and both the markup and the margin, because a 50% markup is not a 50% margin.
Your numbers
What this means
Price and margin as markup climbs
Your pricing at a glance
Price, profit and margin at each markup
Same unit cost, different markups. Notice the margin always trails the markup.
| Markup | Selling price | Profit / unit | Margin |
|---|
Cost-plus pricing, explained
Markup vs Margin
Markup is profit as percent of COST. Margin is profit as percent of PRICE. 50% markup = 33% margin. 100% markup = 50% margin. Always specify which you mean.
Typical Markups by Industry
Retail: 100-200% markup. Restaurants: 200-400%. Manufacturing: 30-100%. Construction: 15-30%. SaaS: 1000%+ (not really applicable). Higher markup = more pricing power.
Cost-Plus Limitations
Doesn't consider competitor pricing or customer willingness to pay. If competitors are cheaper, you lose sales. If customers value more, you leave money on the table. Use as floor, not ceiling.
Beyond Cost-Plus
Value-based pricing (price = value delivered). Competitive pricing (match market). Penetration pricing (low to gain share). Premium pricing (high to signal quality). Often mix strategies.
Common questions
What's the difference between markup and margin?
Markup is profit/cost. Margin is profit/price. 50% markup = 33.3% margin. Same dollar profit, different percentages.
How much should I mark up?
Depends on industry, costs, and competition. 50-100% for typical products. Higher for premium positioning.
Should I include overhead in unit cost?
Yes, for accurate per-unit cost. Allocate fixed costs (rent, salaries, utilities) across expected unit volume.
When is cost-plus pricing bad?
Software, services, luxury goods, where value isn't tied to cost. Apple sells $1000 phones costing $300 to make. Cost-plus would leave money on the table.
How does competition factor in?
If competitors charge less, you may need to lower price (squeeze margin) or differentiate (justify premium). Cost-plus is starting point, not final answer.
Estimates for planning only. A price that covers your cost is a floor, not a promise of sales. Check what competitors charge and what customers will pay before you set a final number.