20% Margin to Markup: a 20% margin needs a 25% markup
To earn a 20% gross margin you have to mark cost up by 25%. Margin is measured on the selling price, markup on the cost, so the markup is always the larger number.
Price any cost at a 20% margin
Prefilled with this page's numbers. Change either field; results update instantly and nothing is sent anywhere.
The formula
20 ÷ 80 × 100 = 25%
price = cost ÷ (1 − 20/100) = cost ÷ 0.8
The conversion is markup = margin ÷ (100 − margin). For 20% that is 20 ÷ 80 = 25%. As the target margin rises the denominator shrinks, which is why high margins need markups that look extreme when quoted on cost.
Price table at 20% margin
Each price is the cost divided by 0.8. The markup column stays at 25% on every line; only the amounts scale.
| Cost | Price at 20% margin | Gross profit | Markup |
|---|---|---|---|
| $5.00 | $6.25 | $1.25 | 25% |
| $10.00 | $12.50 | $2.50 | 25% |
| $25.00 | $31.25 | $6.25 | 25% |
| $50.00 | $62.50 | $12.50 | 25% |
| $100.00 | $125.00 | $25.00 | 25% |
| $250.00 | $312.50 | $62.50 | 25% |
| $500.00 | $625.00 | $125.00 | 25% |
| $1,000.00 | $1,250.00 | $250.00 | 25% |
| $2,500.00 | $3,125.00 | $625.00 | 25% |
| $10,000.00 | $12,500.00 | $2,500.00 | 25% |
Margins near 20%
Between 10% and 30% margin the markup needed runs from 11.1% to 42.9%: it climbs faster than the margin because the cost share of the price keeps shrinking. The multiplier column turns a cost list into prices at that margin in one step.
Worked example
Take a $149.00 item. To keep 20% of the price, divide by 0.8: $186.25. The profit is $37.25, which is 20% of the price and 25% of the cost. Adding 20% to cost instead would have given $178.80, a margin of only 16.7%.
The margin-as-markup trap
Marketplaces and retailers state their requirements as margin. A buyer who needs "20% margin" will not accept a 20% markup: at 20% markup they keep 16.7%, 3.3 points less than agreed.
When a margin target is the right tool
Use 20% margin as a floor, not a slogan. If overheads run at 70% of revenue, a 20% gross margin leaves the difference as operating profit; if they run at 20%, the business breaks even before tax.
Coming from the other direction: a 20% markup, the number people often type by mistake, produces only a 16.7% margin. The 20% margin on this page needs the full 25% markup.
Mirror page: what margin a 20% markup produces.