Markup Percentage (on Cost)

Markup measures profit against what the item cost you. Buy at $80, add 25%, and you sell at $100. This is the natural way to think when you are standing at the supplier counter with an invoice in your hand, and it is how most trade pricing is quoted: materials plus 20%, subcontractors plus 10%.

The arithmetic is easy in both directions. Multiply cost by $1 + m$ to get the price; divide price by $1 + m$ to recover the cost. What is not easy is remembering that this number is not your margin. The same $80-to-$100 deal that is a 25% markup is a 20% margin, because margin measures the identical $20 profit against the $100 price instead. Both figures are correct and they are never equal for a profitable sale. Confusing them is the classic small-business error, and it always errs in the same direction: you charge too little.