What is the difference between markup and margin?
Markup is profit divided by cost. Margin is profit divided by the sell price. A $100 cost sold at $125 is a 25% markup and a 20% margin — same dollars, two different rates.
Construction estimating tool
Markup vs margin calculator
Markup sits on top of your cost. Margin is a share of what you charged. They are never the same number, and pricing as though they are is the most expensive arithmetic mistake in contracting.
Sell price
$12,500.00
Profit
$2,500.00
Markup on cost
25.0%
Margin on sell
20.0%
The relationship, at a glance
| Markup on cost | is the same as | Margin on sell |
|---|---|---|
| 10.0% | → | 9.1% |
| 15.0% | → | 13.0% |
| 20.0% | → | 16.7% |
| 25.0% | → | 20.0% |
| 30.0% | → | 23.1% |
| 35.0% | → | 25.9% |
| 40.0% | → | 28.6% |
| 50.0% | → | 33.3% |
| 66.7% | → | 40.0% |
| 75.0% | → | 42.9% |
| 100.0% | → | 50.0% |
To hit a 40% margin you need a 66.7% markup. Pricing a 40% markup and calling it a 40% margin gives away 11.4 points on every line it touches.
How to use it
- 1 · Cost
Start from your cost
Whatever the work costs you before any markup.
- 2 · Pick
Markup, margin or sell
Enter whichever one you know and the other two are derived.
- 3 · Check
Read the margin
Margin is the one a gross-margin floor is measured against.
Questions
What markup do I need to hit a 40% margin?
66.7%. Margin and markup diverge fast: 50% margin needs 100% markup, and a 100% margin is not reachable at all because you cannot mark up to infinity.
Which one should I quote a floor in?
Margin. A gross-margin floor is a share of revenue, so it stays comparable across jobs of different sizes and cost structures. Markup is how you get there, not how you measure it.
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