Cost Price vs Selling Price

Cost price is what you pay to buy or make an item. Selling price is what you charge a customer for it. The gap between the two is your profit — and the relationship between them is what markup, margin and profit percentage all describe.

Get these two numbers right and most of your pricing maths follows. Get them wrong — for example, forgetting to include delivery in the cost price — and every downstream figure will be off.

Selling Price = Cost Price + Profit

Profit = Selling Price − Cost Price

If you know the cost and the profit you want, you can find the selling price. If you know the selling price and the profit percentage, you can work back to the cost.

When profit is worked out on the cost price (the same as markup), turn the percentage into a multiplier:

Selling Price = Cost Price × (1 + Profit ÷ 100)

To work backwards from a selling price and a profit percentage on cost, divide instead of multiply:

Cost Price = Selling Price ÷ (1 + Profit ÷ 100)

Profit worked out on the cost price is the same as markup. Profit margin, by contrast, is profit as a share of the selling price. A £10 profit on a £40 cost is a 25% markup but only a 20% margin. Mixing the two up is a common pricing mistake — see our margin vs markup guide for the full breakdown.

• Setting a retail price: start from your landed cost and the profit you need, then check the price suits your market.
• Checking a competitor: enter their selling price and an assumed profit percentage to estimate their likely cost — treat the result as an estimate only.
• Negotiating with suppliers: if your selling price is fixed by the market, working back to the cost tells you what you can afford to pay.

The cost price / selling price calculator lets you find a selling price from cost and profit %, or work back to the cost from a selling price. For setting prices using markup, try the markup calculator.