Glossary
Markup
Also called: markup percentage
Markup is the amount added to cost to reach a price, expressed as a percentage of the cost — not of the price.
A job that costs $1,000, marked up 40%, is priced at $1,400. The $400 profit is 40% of the cost but only about 28.6% of the price. That second figure is the margin, and it is the one your P&L reports.
Confusing the two is one of the most common pricing errors in contracting. An owner who wants a 40% margin and applies a 40% markup ends up well short of it on every job, without ever seeing why.
Why it matters to a contractor
Your books report margin. If you price with markup, you need to know how the two convert, or the profit you planned and the profit you report will never agree.
Work it out on your numbers
See also