How Much to Mark Up Products — Markup Formula Guide

Last updated: May 2026

Setting the right price for your products is one of the hardest parts of running a product business. Charge too much and you lose customers. Charge too little and you lose money, sometimes without even realising it.

Markup is the most practical tool you have for solving this. It gives you a consistent, repeatable method for turning your production costs into selling prices. This guide covers the formula, the difference between markup and profit margin (they’re not the same thing), and worked examples for candle, soap, and jewellery businesses.

In this article:

• What is a markup?
• Percentage vs. Absolute Markups
• A basic percentage markup formula
• Markup vs profit margin, the critical difference
• Worked examples for candle, soap, and jewellery businesses
• Retail vs wholesale markup — a critical distinction for product businesses
• The most common markup mistake product businesses make
• What should I be charging for my products?
• Pricing Strategies
• Using software to calculate your markups
• Frequently Asked Questions

What is a markup?

A markup is the amount you add to your production cost to arrive at a selling price, typically expressed as a percentage of what it cost you to make the product.

It’s a method for building consistent profit margins into your prices across your whole product range. The goal is straightforward: every sale should return more than it costs you to make. That means your total revenue from sales must exceed your total cost of goods sold.

Markup also matters for discounting. With a consistent markup baked into your prices, you can offer a sale or bundle deal without accidentally selling below cost.

Percentage vs. Absolute markups

There are two main types of markups: percentage and absolute.

With a percentage markup, you multiply your production cost by a percentage. This is sometimes called “cost-plus pricing.”

For example, if your product costs $20 to produce and you want a 20% markup, you’d charge $24. ($20 × 120% = $24.)

With an absolute markup, you add a flat dollar amount on top of your production cost. If that same $20 product gets a $15 flat markup, you charge $35. ($20 + $15 = $35.)

Which to use? Percentage markups work best for products in competitive categories where buyers compare prices, they keep your margins consistent even as your costs fluctuate. Absolute markups suit one-of-a-kind or high-perceived-value pieces where buyers aren’t comparison shopping. Many product businesses use percentage markups for their standard range and flat markups for custom or bespoke work.

A basic percentage markup formula

A simple percentage markup formula looks like this:

Base Manufacture Cost + (Base Manufacture Cost × Markup) = Recommended Price

Base Manufacture Cost

Your Base Manufacture Cost (also called your “Cost Price”) is what it actually costs you to make the product, typically just materials. If you set your selling price equal to your cost price, you’d make zero profit. You might even make a loss once you factor in selling fees and overheads.

More details on how to calculate your Base Manufacture Cost →

The (Base Manufacture Cost × Markup) part applies a multiplier to your costs. Here’s what common markups look like as multipliers:

Important: the price from the markup formula above doesn’t include labor costs, overheads, or platform fees. Add those after the markup is calculated so your gross profit actually lands where you need it. It also assumes your material cost is accurate. If you import materials, use a landed cost calculator to ensure your base cost includes shipping, tariffs, and import duties.

Our full small-batch pricing guide covers these additional factors: How to price small-batch products →

If you make soap, our free soap making cost calculator applies 2x, 3x, and 4x markups to your actual cost per bar so you can see suggested retail prices and margins side by side.

Examples of pricing markup calculations

Let’s step through some examples using a scarf with a $29 materials cost.

First, a 0% markup, just to show the baseline:

29 + (29 × 0) = $29

No markup added, so the price stays at cost. Zero profit.

Now a 150% markup (1.5 multiplier):

29 + (29 × 1.5) = $72.50

That gives a gross profit of $43.50 before labor and fees.

Want to reverse-engineer the markup on an existing product? Use this:

Plug in your current selling price for Price and your total manufacture cost for Cost. Remove any labor, overheads, or fees before calculating so you’re comparing like for like.

Markup vs profit margin — the critical difference

This is where a lot of product businesses get tripped up. Markup and profit margin are related, but they’re calculated differently, and confusing them can mean your prices are lower than you think.

• Markup is calculated on your cost: (Price − Cost) ÷ Cost
• Profit margin is calculated on your selling price: (Price − Cost) ÷ Price

Let’s use the same numbers: a product that costs $20 to make, sold for $60.

• Markup: ($60 − $20) ÷ $20 = 200%
• Profit margin: ($60 − $20) ÷ $60 = 66.7%

The markup is 200% but the margin is only 66.7%. Same product, same price, same profit, just measured differently.

Why does this matter? If you tell yourself “I’ve got a 200% markup so I’m making 200% profit,” you’re wrong. Your actual margin is much lower. And if you’re making purchasing decisions or setting discount limits based on that figure, you could be in trouble.

For a deeper look at the difference, our guide to markup vs profit margin walks through the maths in detail.

Worked examples — candles, soap, and jewelry

Abstract formulas only take you so far. Here’s how markup looks in practice for the three most common Stocksmith product business verticals.

Candle product business example

Say you make soy candles. Your materials cost per candle (wax, fragrance, wick, jar, label) works out to $4.50.

• 100% markup (2x cost): $4.50 + $4.50 = $9.00
• 150% markup (2.5x cost): $4.50 + $6.75 = $11.25
• 200% markup (3x cost): $4.50 + $9.00 = $13.50

Most candle businesses selling direct-to-consumer target 200-300% markup on materials to leave room for labor, packaging, Etsy fees, and still clear a profit. A 100% markup on a $4.50 candle leaves almost nothing once you add those costs in.

Soap business example

A batch of cold-process soap might yield 12 bars, with total material costs (oils, lye, colorants, fragrance, molds) of $18, that’s $1.50 per bar.

• 200% markup (3x cost): $1.50 + $3.00 = $4.50 per bar
• 300% markup (4x cost): $1.50 + $4.50 = $6.00 per bar

At a market stalls, $4.50-$7.00 per bar is a typical range. But at $4.50, you’re barely covering labor on a batch that might take two or three hours of active time. Many soap businesses use 3x-4x materials cost as their floor, then assess market positioning from there.

Jewelry product business example

A pair of silver earrings uses $8.00 in materials (silver findings, gemstone cabochons, wire).

• 200% markup (3x cost): $8.00 + $16.00 = $24.00
• 300% markup (4x cost): $8.00 + $24.00 = $32.00
• 400% markup (5x cost): $8.00 + $32.00 = $40.00

Jewelry is the vertical where absolute markups often make more sense. Each piece is unique, so buyers aren’t comparison shopping the same way. A pair of earrings that took two hours to make at $24 could actually be underpriced. Your labor alone at a $20/hr rate would be $40. The materials-only markup doesn’t tell the full story here. Read more in our guide to COGS ratios by craft niche.

Retail vs wholesale markup — a critical distinction for product businesses

Most pricing advice focuses on retail markup. But if you sell wholesale (to a boutique, gift shop, spa, or through a marketplace like Faire) you need a completely different number. And you need to calculate your retail price first, before you can offer wholesale.

Here’s why: the standard wholesale expectation in small-batch and independent retail is 50% of your retail price. That’s not a suggestion. It’s what most buyers expect when they approach you for a wholesale account.

So if your retail price is $30, your wholesale price would be $15. That means your total material + labor + overhead cost needs to be well under $15 for the order to make sense.

Work backwards from that:

• If your cost to make a product is $5, a retail price of $30 gives you a 500% markup at retail.
• Wholesale at $15 gives you a 200% markup on cost (still workable).
• But if your cost is $8 and your retail is $20, wholesale at $10 only gives you a 25% markup. That’s very tight once you account for packaging and shipping.

The critical insight: you need a high enough retail markup to make wholesale viable. Many product businesses who “can’t afford to offer wholesale” are actually just underpricing at retail. Knowing your real COGS for small-batch products is what makes this calculation possible. Our guide to pricing small-batch products for wholesale covers the full framework.

The most common markup mistake product businesses make

Most pricing advice tells you to check what competitors charge and match it. That’s backwards.

If you don’t know what it actually costs you to make something, you’re just copying someone else’s guess. And if their guess is wrong (if they’re losing money on every sale without realising it) you’ll lose money too.

Here’s a concrete example. Say you make cold-process soap. You look at what other soap businesses charge and land on $7 per bar. That seems reasonable. The markup looks fine on paper.

But here’s the problem: you haven’t counted your time. A batch takes 30 minutes of active mixing, plus cutting, curing-room turning every week for six weeks, labeling, and packaging. That’s closer to 3 hours of total labor per batch. At a conservative $15/hr, that’s $45 of labor for a 12-bar batch, or $3.75 per bar.

Add materials ($1.50/bar), and your true cost is $5.25. At $7, you’re making $1.75 gross margin, before Etsy fees, packaging, or any overhead. That’s not a business, that’s subsidising a hobby.

The fix is straightforward: know your costs before you pick your markup. That means tracking materials accurately, valuing your time at a real hourly rate, and factoring in overhead costs. Only then does the markup percentage mean anything.

What should I be charging for my products?

Now that you can calculate markup, let’s talk about what your prices should actually be. Because here’s the thing: the price your markup formula spits out and the price you should actually charge can be different.

Your price should also reflect your brand, how much customers are willing to pay, what similar products sell for, and the total cost of delivering the product (including fees, packaging, and your time). Markup gives you the floor. Market research, brand positioning, and pricing psychology take you from there.

There are a few frameworks worth keeping in mind:

Perceived Value Pricing

What’s the customer actually willing to pay? A luxury small-batch candle and a basic supermarket candle can have similar material costs but very different prices. If your brand, photography, and packaging signal quality, you can support a higher price. And you should.

Competitive Pricing

What are comparable products selling for? If you’re selling in a category with many similar options, buyers will compare. If you’re selling something genuinely distinctive, you have more room. Know which situation you’re in.

Target Profit Margin

Work backwards from where you need to be. If you need a 60% gross margin to stay in business at your volume, what does that mean for your prices? Build in your overhead costs and you’ll have a much clearer floor price than markup alone gives you.

Pricing Strategies

Once you’ve done the maths, you need a strategy for how you use those numbers.

Cost-based pricing — you price based on what it costs you to make. You need accurate material costs, labor, and overheads for this to work. Most product businesses start here because it’s concrete and grounded in reality.

Value-based pricing — you price based on what the customer gets, not what it costs you. This often leads to higher prices and better margins, but you need a strong sense of your market and a brand that supports the premium.

Competition-based pricing — you anchor to what competitors charge. Useful as a sanity check, but dangerous as a primary method. If you don’t know your costs, you can easily match a competitor’s price while they’re profitable and you’re not.

Most product businesses end up using a blend: cost-based as the floor (so you never sell at a loss), value-based as the ceiling (so you don’t leave money on the table), and competitive research as a reality check.

Using software to calculate your markups

Once you’ve decided on a pricing strategy, software can do the calculation work for you.

Excel works if you have a small, simple product range, but it gets unwieldy fast. A recipe change or supplier price increase means manually updating every formula — and when input costs move, repricing without eating the margin is its own piece of work. And if you have variants, bundles, or materials shared across multiple products, the spreadsheet quickly becomes a liability rather than a tool.

Stocksmith calculates your base manufacture cost automatically from your recipes and purchase history, then shows you the implied markup and profit margin at any selling price. When your material costs change (a supplier raises prices, you find a better deal) your cost figures update, so you can see immediately whether your current prices still deliver the margin you need. Start a free 14-day trial →

Frequently Asked Questions

Conclusion

How much you mark up your products is a consequential decision, probably more consequential than most product businesses realise. Too little and you’re busy but broke. Too much and you’re priced out of your market.

The formula is a starting point. Use it to set a floor you’re confident in, a price you know covers your materials at minimum. Then layer in labor, overheads, and fees. Check it against what the market will bear. Adjust.

Most importantly: track your actual costs. An informed markup decision is only possible if you know what your products really cost to make.