Markup to margin, both directions
Every row below is the same $100 of cost with a different markup applied. The margin column is what is left as a share of the price the client pays. The gap between the two columns widens as the markup grows, which is why the confusion gets more expensive at the top end, not less.
| Markup on cost | $100 cost sells for | You keep | Margin |
|---|---|---|---|
| 10% | $110.00 | $10.00 | 9.09% |
| 15% | $115.00 | $15.00 | 13.04% |
| 20% | $120.00 | $20.00 | 16.67% |
| 25% | $125.00 | $25.00 | 20% |
| 30% | $130.00 | $30.00 | 23.08% |
| 35% | $135.00 | $35.00 | 25.93% |
| 40% | $140.00 | $40.00 | 28.57% |
| 50% | $150.00 | $50.00 | 33.33% |
Every figure in this table is computed at build time from the two formulas, not typed in — the same reason the totals in the builder above are computed rather than illustrated.
Why the mix-up costs real money
A contractor who believes they are running a 40% margin because they add 40% to cost is actually running 28.57%. On a job with $5,450.00 of cost — the sample loaded above — that belief is the difference between what they think they earned and what the bank shows, every job, all year. The error is invisible because both numbers are “forty percent” and the job still gets done.
It also runs the other way and loses work. Aiming at a 30% margin by adding 30% markup underprices the job; hitting that margin actually takes 42.86% markup. Bid against a competitor who knows the difference and you will win the jobs you should have lost.
Markup covers overhead before it covers profit
Markup is not profit with a different name. It has to absorb everything that is not on the line items: insurance, vehicles and fuel, tools, bonding, software, the phone, and the hours spent writing estimates for jobs you do not win. Profit is whatever survives that. This is why the builder keeps markup as its own field applied to the subtotal rather than letting you inflate individual rates — with markup separated, your line rates stay a true record of cost, so you can re-price one material that jumped without unpicking the profit hidden inside it.
Across the 10 worked examples on this site that separate materials from labor, 53% of the sample value sits in labor and 47% in materials — a reminder that on most of these documents the markup is riding mostly on hours, which are the lines your estimate is most likely to have got wrong. Those are the shape of our sample sheets, not market pricing.
Put it into a document
Knowing the percentage is half of it; the other half is a document that applies it in a consistent order. Markup goes on the subtotal, the discount comes off after that, and tax is calculated last — the estimate maker explains every field and keeps that order fixed. For competitive work, the construction bid template carries markup as a visible line; for the method behind the cost basis it is applied to, read how to estimate construction jobs.
Markup vs margin FAQ
What is the difference between markup and margin?
Markup is measured against your cost; margin is measured against the price you charge. Add 50% markup to a $100 cost and you sell at $150 — but the $50 you kept is only 33% of that $150, so the margin is 33%. Same job, same money, two different percentages, and the one that describes your business is the margin.
Is a 50% markup the same as a 50% margin?
No, and this is the mistake that costs money. A 50% markup is a 33.33% margin. To actually earn a 50% margin you have to apply a 100% markup — double your cost. Anyone pricing at 'fifty percent' without saying which one is off by a third of their profit.
How do I convert markup to margin?
Margin = markup / (100 + markup). So 25% markup gives 25/125 = 20% margin. Going the other way, markup = margin / (100 − margin): a 30% margin needs 30/70 = 42.86% markup. The table on this page runs the conversion in both directions.
Which one should I use when pricing a job?
Price with markup, because markup is what you apply to a cost you know. Judge the business with margin, because margin is what tells you what share of revenue you kept. Estimating software — including the builder on this page — applies markup to the subtotal for that reason.
Does markup cover profit?
Only what is left of it. Markup has to cover overhead first — insurance, vehicles, tools, bonding, the office, and the unbillable hours spent estimating jobs you did not win — and profit is what survives after that. A markup set to match a competitor's number without knowing your own overhead is a guess wearing a percentage sign.