Free calculator
Markup vs margin calculator.
Enter your job cost and your markup or target margin. See your price, your gross profit, and the margin you are actually earning.
Your price
$12,000
- Gross profit
- $2,000
- Markup
- 20.0%
- Margin
- 16.7%
A 20.0% markup is only a 16.7% margin.
Markup and margin are not the same number
Markup is profit as a percentage of your cost. Margin is profit as a percentage of your price. Because price is always bigger than cost, your margin is always smaller than your markup.
Say a job costs $10,000 and you add a 20% markup. Your price is $12,000 and your profit is $2,000. That $2,000 is 20% of your cost, but only 16.7% of your price. If you thought you were running a 20% margin, you are short about 3 points on every job.
| Markup | Actual margin |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 40% | 28.6% |
| 50% | 33.3% |
| 100% | 50.0% |
The formulas
- Price from markup: cost × (1 + markup)
- Price from margin: cost ÷ (1 minus margin)
- Margin from markup: markup ÷ (1 + markup)
- Markup from margin: margin ÷ (1 minus margin)
Why it matters for contractors
Your overhead, your bonding capacity, and your financial statements are all measured in margin, not markup. If your overhead runs 15% of revenue and you mark jobs up 15%, you are not breaking even. You are losing money on every job. Price from the margin you need, and check it against your actual results with job costing and a WIP schedule.
FAQ
Common questions.
What markup do I need for a 20% margin?
25%. Divide the margin by 1 minus the margin: 0.20 ÷ 0.80 = 0.25. On a $10,000 cost, a 25% markup gives a $12,500 price and $2,500 of profit, which is 20% of the price.
Is markup or margin better for pricing jobs?
Either works as long as you know which one you are using. Many contractors price with markup because it is easy to apply to costs, but they should set that markup based on the margin they need to cover overhead and profit.
Ready to get clear on your numbers?
Book a free 30-minute call. We will talk about where your numbers are now, where you want them to be, and whether TAB Services is the right fit.