Free reference
A 40% markup is a 28.6% margin.
Both directions, with the number to multiply cost by. The whole relationship on one page, because the shape of it is the lesson: margin climbs far more slowly than markup, and it can never reach 100%.
Markup is measured against your cost. Margin is measured against the price. Same job, same money, two different percentages — and using one where you meant the other gives away points on every job you sell.
You applied a markup. What margin did you get?
Read down from the markup you used. The middle column is what actually landed in the business.
| Markup on cost | Margin you get | Multiply cost by |
|---|---|---|
| 5% | 4.8% | ×1.05 |
| 10% | 9.1% | ×1.1 |
| 15% | 13.0% | ×1.15 |
| 20% | 16.7% | ×1.2 |
| 25% | 20% | ×1.25 |
| 30% | 23.1% | ×1.3 |
| 35% | 25.9% | ×1.35 |
| 40% | 28.6% | ×1.4 |
| 45% | 31.0% | ×1.45 |
| 50% | 33.3% | ×1.5 |
| 60% | 37.5% | ×1.6 |
| 70% | 41.2% | ×1.7 |
| 75% | 42.9% | ×1.75 |
| 80% | 44.4% | ×1.8 |
| 90% | 47.4% | ×1.9 |
| 100% | 50% | ×2 |
| 125% | 55.6% | ×2.25 |
| 150% | 60% | ×2.5 |
| 175% | 63.6% | ×2.75 |
| 200% | 66.7% | ×3 |
| 233% | 70.0% | ×3.33 |
| 300% | 75% | ×4 |
You want a margin. What markup gets you there?
Read down from the margin you are aiming at. This is the table to price from.
| Margin you want | Markup needed | Multiply cost by |
|---|---|---|
| 5% | 5.3% | ×1.053 |
| 10% | 11.1% | ×1.111 |
| 15% | 17.6% | ×1.176 |
| 20% | 25% | ×1.25 |
| 25% | 33.3% | ×1.333 |
| 30% | 42.9% | ×1.429 |
| 33% | 49.3% | ×1.493 |
| 35% | 53.8% | ×1.538 |
| 40% | 66.7% | ×1.667 |
| 45% | 81.8% | ×1.818 |
| 50% | 100% | ×2 |
| 55% | 122.2% | ×2.222 |
| 60% | 150.0% | ×2.5 |
| 65% | 185.7% | ×2.857 |
| 70% | 233.3% | ×3.333 |
| 75% | 300% | ×4 |
The four that cost people money
- Wanting 40% and marking up 40%
- A 40% markup produces a 28.6% margin. Eleven and a half points given away on every job, and nothing in the process flags it — the estimate looked right and the invoice looked right. This is the single most expensive arithmetic error in contracting.
- The 50 / 33 pair
- A 50% markup is a 33.3% margin. If somebody tells you they "make 50 points" on materials, they are almost always describing markup and reporting it as margin. The two words get used interchangeably and they are not interchangeable.
- Doubling is not a 100% margin
- Doubling the cost — a 100% markup — is a 50% margin. Nothing you can charge produces a 100% margin, because a 100% margin means the job cost you nothing.
- Margin cannot reach 100%, markup has no ceiling
- That asymmetry is why the table gets steeper as it goes down. Past about 70% margin you have to raise markup enormously to move margin a little, which is why chasing the last few points of margin stops being worth it long before it becomes impossible.
The arithmetic
Both are identities — they are true by definition, not approximations, and they do not vary by trade or market.
- margin = markup ÷ (1 + markup)
- markup = margin ÷ (1 − margin)
- price = cost ÷ (1 − margin)
There is no recommended number on this page, and that is deliberate. What you should charge depends on your overhead, your market and the risk you are carrying — work out your overhead rate and price from your own figures rather than a benchmark invented for a web page.
For a single conversion there is a markup vs margin calculator. For costing a whole job, a job costing template.
The table is free. Knowing your real cost is the hard part.
We do your most recent month in full, free, reviewed by a US CPA and back within two days.