Pricing
Markup required for a target margin
Use this when the target arrives as a margin. It returns the larger markup needed to hit that margin, and the price follows from C / (1 - g). A 40% margin needs a markup of 0.40 / 0.60 = 66.6667%.
The Formula
m = g / (1 - g)
Use this when the target arrives as a margin. It returns the larger markup needed to hit that margin, and the price follows from C / (1 - g). A 40% margin needs a markup of 0.40 / 0.60 = 66.6667%.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| g | Target gross margin as a decimal | decimal | Profit wanted as a share of price. Must stay below 1, since margin can never reach 100%. |
| m | Markup on cost that delivers it | decimal | Always larger than g. A margin of 40% becomes a markup of 66.6667%. |
What Each Symbol Means
gdecimal
Target gross margin as a decimal
Profit wanted as a share of price. Must stay below 1, since margin can never reach 100%.
mdecimal
Markup on cost that delivers it
Always larger than g. A margin of 40% becomes a markup of 66.6667%.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate markup page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Markup, filed under Business. Every number the guide produces comes from substituting into this one line.