Free tool
Markup vs margin calculator
A 30% markup is not a 30% margin. It is a 23% margin, and the gap between those two numbers is where a lot of contracting profit quietly goes.
Method reviewed by Darren Lim, US CPALicence CPA.74253602Free · No email required · Nothing leaves your browser
Your numbers
Your margin
33.3%
The same job is a 50.0% markup. Same money, two numbers — markup divides by cost, margin divides by price.
Markup needed for a given margin
| Margin | Markup |
|---|---|
| 10% | 11% |
| 20% | 25% |
| 25% | 33% |
| 30% | 43% |
| 40% | 67% |
| 50% | 100% |
| 60% | 150% |
The difference, in one line each
Markup is measured against what the job cost you. Cost $100, add 30%, sell at $130. The 30% is markup.
Margin is measured against what you sold it for. Sold at $130, kept $30, so you kept 23% of the sale. The 23% is margin.
Same job, same money, two different percentages — because they are divided by two different things. Markup divides by cost; margin divides by price. Every time someone says "we run thirty points" without saying which, there is a 7-point ambiguity sitting in the sentence.
Why it costs contractors real money
The expensive version of this mistake is wanting a 40% margin and applying a 40% markup. A 40% markup produces a 28.6% margin. You have quietly given away eleven and a half points on every job, and nothing in your process will ever tell you — the estimate looked right, the invoice looked right, and the year-end just came in lower than expected.
It compounds with the discount problem. On thin margins, taking 10% off the price does not take 10% off the profit — it takes a third or more of it, because the cost did not move. The calculator shows both, side by side, so the size of a "small" discount is visible before you give it.
Which one to actually use
Use margin when you are thinking about the health of the business. Your P&L reports margin, your break-even is calculated from margin, and anyone comparing you to industry benchmarks is talking about margin.
Use markup when you are building a price at the counter, because you are starting from a cost and working up. The trick is to convert your target margin into the markup that produces it, rather than using the same number for both — which is exactly what the middle section of this calculator is for.
And be specific in conversation. "Thirty points" is not an answer. "Thirty percent margin" is.
Common questions
- What markup do I need for a 50% margin?
- A 100% markup — you double the cost. Margins climb much faster than markups as they get higher: a 50% markup gives a 33% margin, a 100% markup gives 50%, and a 200% markup gives 67%. This is why "just add 20%" stops working as a rule the moment a job has real material content in it.
- Should material and labour carry the same markup?
- Usually not. Material carries handling, storage, waste, warranty exposure and the cash you fronted to buy it; labour carries burden, non-billable time and callback risk. Most trades end up marking them differently, and the only way to know what yours should be is to cost real jobs both ways and see which one is being subsidised.
- Does this include overhead?
- The markup and margin conversion is gross — cost of the job against price of the job, before rent, insurance and the office. To see what a job made after it carried its share of running the business, use the job profit calculator, which takes an overhead rate as well.
What we do about it
Your monthly pack reports gross margin by the categories that matter in your trade, so the number you are pricing against is your actual margin from real jobs rather than a target somebody picked years ago.