Tool
Markup vs margin calculator.
Enter what the job costs you, then any one of markup, margin or price. The other two fill in. Markup is profit as a share of cost; margin is profit as a share of price — and pricing one as if it were the other is the most common way a profitable-looking job loses money.
The mistake this prevents
A job costs $1,000 and you want a 30% margin. Add 30% to the cost and you quote $1,300 — a margin of 23.1%, not 30%. The price that actually earns a 30% margin is $1,428.57. The difference is $128.57 on every $1,000 of job cost. On $300,000 a year of job costs, that is about $38,600 of profit the books said you would make and you did not.
The fix is one formula. To hit a target margin, divide cost by one minus the margin:price = cost ÷ (1 − margin). To apply a markup, multiply:price = cost × (1 + markup).
Markup to margin, at a glance
| Markup on cost | Margin on price |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20% |
| 30% | 23.1% |
| 33.3% | 25% |
| 40% | 28.6% |
| 50% | 33.3% |
| 66.7% | 40% |
| 75% | 42.9% |
| 100% | 50% |
| 150% | 60% |
A 100% markup — doubling the cost — is a 50% margin. A margin can never reach 100%; a markup can go as high as you can sell it.
Which one to use
Price with markup, because it starts from the number you know: what the job costs. Judge the business with margin, because overhead, software and your own wage come out of the price, not the cost. Most flat-rate price books are built as a markup on parts and labour; most profit targets are stated as margin. Keep the two in separate columns and convert with the table above.
Margin has to cover more than you might think — trucks, insurance, the office, and the software that runs the schedule. The hourly rate calculator works out what an hour has to cost to cover all of it, and the software cost calculator prices the scheduling system for your team.