What is markup?
Markup is the amount added to an item's cost to set its selling price, shown as a percentage of the cost.
Markup starts from cost. The formula is (selling price minus cost) divided by cost, times 100. An item that costs $20 and sells for $30 has a $10 markup, which is 50% of cost. To set a price from a target markup, multiply the cost by one plus the markup: a $20 cost with a 60% markup gives a $32 price.
Retailers like markup because it is quick to apply when stock arrives: everything in a category gets cost times 2 (a 100% markup, called keystone) or cost times 1.6. The trap is that markup and margin are different numbers. A 100% markup is a 50% margin; a 50% markup is only a 33.3% margin. If you want a 40% margin, you need a markup of 66.7%.
To convert, margin = markup / (1 + markup), and markup = margin / (1 - margin), using decimals. Many owners set prices by markup but judge results by margin on the profit report, so it helps to know both for each category. Remember that discounts come off the selling price, so a 20% off sale cuts much deeper into margin than the label suggests.
In SeroPOS the back office has a default profit percentage in Business Settings, and when you add a purchase each line shows a profit margin percentage beside the unit selling price, so the selling price can be worked out from the new cost as stock arrives. The setting is applied to the purchase cost, so it behaves as a markup. Reports such as Profit / Loss and the Stock Report then show the resulting margin.
A pet store buys dog beds at $36.00. Its rule for beds is a 75% markup, so the price is $36.00 x 1.75 = $63.00. The margin on that price is $27.00 / $63.00 = 42.9%. If the beds go on a 20% off sale at $50.40, the profit drops to $14.40, a 28.6% margin.