Most business owners make a critical error when calculating markup percentages. The common mistake is multiplying the wholesale cost by the desired markup percentage and adding that amount to the cost. This method seems logical but creates a serious pricing problem.

For example, if you have a $10 wholesale cost and want a 40% markup, the incorrect method would be:
– $10 × 40% = $4
– $10 + $4 = $14 retail price

However, when you verify this calculation by working backwards:
– $14 × 40% = $5.60
– $14 – $5.60 = $8.40

Your actual cost recovery is only $8.40, leaving you $1.60 short of your $10 wholesale cost. This means you’re actually losing money on every sale.

The correct 40% markup calculation on a $10 wholesale cost should yield a $16.67 retail price. When verified:
– $16.67 × 40% = $6.67
– $16.67 – $6.67 = $10.00

This method ensures you recover your full wholesale cost while achieving your intended markup percentage. The calculator below performs the correct calculations automatically. Simply enter your wholesale cost and desired markup percentage to get the accurate retail price.