Markup vs. Margin
Do You Know the Difference?
Most contractors confuse these two, and it quietly costs them thousands of dollars a year. Here is the clear explanation, and the calculator to get it right.
Two Numbers. Two Very Different Meanings.
Same job. Same cost. Same selling price, but markup and margin tell you different things.
Based on your Cost
Markup measures how much you add on top of your cost. It's calculated as a percentage of what you paid, not what you charged.
Example: You spend $800, sell for $1,000.
Markup = $200 / $800 = 25%
Based on your Revenue
Gross margin measures how much of your selling price remains after direct costs. It's calculated as a percentage of what you charged the client.
Example: You spend $800, sell for $1,000.
Margin = $200 / $1,000 = 20%
The Costly Mistake
A contractor says, "I want to make 30% profit", so they add a 30% markup to every job. But a 30% markup only gives them a 23.1% margin. Over a $500,000 year, that gap is worth over $34,000 in missing profit.
Quick Reference: Margin vs. Markup
If you want a certain gross margin, here is the markup you actually need to charge.
| Target Gross Margin | Required Markup | Example: $1,000 Cost | Profit |
|---|---|---|---|
| 10% | 11.1% | $1,111.11 | $111.11 |
| 15% | 17.6% | $1,176.47 | $176.47 |
| 20% | 25.0% | $1,250.00 | $250.00 |
| 25% | 33.3% | $1,333.33 | $333.33 |
| 30% | 42.9% | $1,428.57 | $428.57 |
| 35% | 53.8% | $1,538.46 | $538.46 |
| 40% | 66.7% | $1,666.67 | $666.67 |
| 50% | 100.0% | $2,000.00 | $1,000.00 |
Highlighted rows (25-30%) are the most common target range for contractors and trades.
Calculate Both at Once
Enter your cost and selling price, see your markup and margin instantly.
The "I Want X% Profit" Scenario
Enter your cost and your desired profit percentage, see what happens if you apply it as a markup vs. as a margin.