Markup vs Margin Calculator for Contractors
This is the most expensive arithmetic mistake in the trades. A 50 percent markup is a 33 percent margin, and a contractor who thinks those are the same thing is losing a sixth of every job and cannot work out where it went.
Worked example
These are the figures the calculator opens with and the answer it gives. Change anything above and every number below moves with it.
- Your cost for the job10000 $
- I want to setMarkup percent
- That number50 % or $
Price to charge$15,000.00
| Your cost | $10,000.00 |
|---|---|
| Price | $15,000.00 |
| Gross profit | $5,000.00 |
| Markup, against cost | 50% |
| Margin, against price | 33.3%this is the one your accountant means |
| If you want this margin | Mark up cost by | On $10,000 cost, charge |
|---|---|---|
| 10% | 11.1% | $11,111.11 |
| 15% | 17.6% | $11,764.71 |
| 20% | 25% | $12,500.00 |
| 25% | 33.3% | $13,333.33 |
| 30% | 42.9% | $14,285.71 |
| 35% | 53.8% | $15,384.62 |
| 40% | 66.7% | $16,666.67 |
| 50% | 100% | $20,000.00 |
What this calculator assumes
- Markup is measured against your cost. Margin is measured against the price. They are never the same number and confusing them is the most expensive arithmetic mistake in the trades.
- A 50 percent markup is a 33.3 percent margin. To actually keep 50 percent of the price you have to mark up by 100 percent.
The two definitions, and the only thing you have to remember
Markup is measured against your cost. Margin is measured against the price. Same dollar of profit, different denominator, and the denominators are never equal because the price is always bigger than the cost.
Cost $1,000, price $1,500. The profit is $500. As markup that is 500 over 1,000, which is 50 percent. As margin it is 500 over 1,500, which is 33.3 percent. Both describe the same job.
The rule to keep: markup is always the bigger number. If someone quotes you a percentage and you cannot tell which one they mean, ask, because on a $50,000 price the gap is $8,333.
Why this costs real money
A contractor decides he needs 30 percent to survive. He marks his costs up 30 percent, and his actual margin is 23 percent. Every year he takes 7 points less than he planned and every year he cannot explain why the bank balance does not match the job book.
To actually keep 30 percent of the price, the cost has to be marked up by 42.9 percent. To keep 40 percent, mark up 66.7. To keep half the price, mark up 100. That last one surprises everybody and it is the clearest illustration of the gap.
The formula both ways: markup = margin / (100 - margin) x 100. And margin = markup / (100 + markup) x 100.
Which one should you actually use
Price with markup, because it is the one you can apply to a cost sheet as you build the estimate. Measure with margin, because it is the one that compares to your P and L, to other contractors, and to last year.
Every accountant, lender and industry benchmark talks in margin. Every supplier and estimator talks in markup. Know which room you are in.
Questions people ask
Is a 50 percent markup the same as a 50 percent margin?
No. A 50 percent markup gives a 33.3 percent margin. To achieve a 50 percent margin you must mark up your cost by 100 percent, which is charging double your cost.
How do I convert markup to margin?
Margin equals markup divided by 100 plus markup, times 100. A 35 percent markup is 35 / 135 = 25.9 percent margin.
What markup should a contractor use?
Work out overhead as a percentage of revenue, decide the profit you want, and use the overhead and profit calculator.
Is gross margin the same as profit?
No. Gross margin is what is left after direct job costs and it still has to pay your overhead: the truck, the insurance, the phone, the office. Net profit is what is left after all of that.
Free Contractor Estimate Template, free, no signup, PDF Word and Excel.
Common sizes, worked out
The same calculator with the numbers already filled in, one page per size, each ending in its own material list.
More sizes, answered
Each row is this calculator run with those numbers when the page was built. Type the same numbers in above to see every line of the working.
| Example | What it assumes | Answer |
|---|---|---|
| 5% markup | Five percent added to a $10,000 cost is a $10,500 price, and $500 out of $10,500 is 4.8 percent. | Margin, against price: 4.8% |
| 10% markup | Ten percent added to a $10,000 cost is an $11,000 price, and $1,000 out of $11,000 is 9.1 percent. | Margin, against price: 9.1% |
| 12% markup | Twelve percent added to a $10,000 cost is an $11,200 price, and $1,200 out of $11,200 is 10.7 percent. | Margin, against price: 10.7% |
| 15% markup | Fifteen percent added to a $10,000 cost is an $11,500 price, and $1,500 out of $11,500 is 13 percent. | Margin, against price: 13% |
| 22% markup | Twenty two percent added to a $10,000 cost is a $12,200 price, and $2,200 out of $12,200 is 18 percent. | Margin, against price: 18% |
| 25% markup | Twenty five percent added to a $10,000 cost is a $12,500 price, and $2,500 out of $12,500 is exactly 20 percent. | Margin, against price: 20% |
| 40% markup | Forty percent added to a $10,000 cost is a $14,000 price, and $4,000 out of $14,000 is 28.6 percent. | Margin, against price: 28.6% |
| 50% markup | Fifty percent added to a $10,000 cost is a $15,000 price, and $5,000 out of $15,000 is 33.3 percent. | Margin, against price: 33.3% |
| 55% markup | Fifty five percent added to a $10,000 cost is a $15,500 price, and $5,500 out of $15,500 is 35.5 percent. | Margin, against price: 35.5% |
| 60% markup | Sixty percent added to a $10,000 cost is a $16,000 price, and $6,000 out of $16,000 is 37.5 percent. | Margin, against price: 37.5% |
| 70% markup | Seventy percent added to a $10,000 cost is a $17,000 price, and $7,000 out of $17,000 is 41.2 percent. | Margin, against price: 41.2% |
| 75% markup | Seventy five percent added to a $10,000 cost is a $17,500 price, and $7,500 out of $17,500 is 42.9 percent. | Margin, against price: 42.9% |
| 80% markup | Eighty percent added to a $10,000 cost is an $18,000 price, and $8,000 out of $18,000 is 44.4 percent. | Margin, against price: 44.4% |
| 10% margin | To keep 10 percent of the price, add 11.1 percent to a $10,000 cost: $11,111.11. | Markup, against cost: 11.1% |
| 12% margin | To keep 12 percent of the price, add 13.6 percent to a $10,000 cost: $11,363.64. | Markup, against cost: 13.6% |
| 20% margin | To keep 20 percent of the price, add exactly 25 percent to a $10,000 cost: $12,500. | Markup, against cost: 25% |
| 25% margin | To keep 25 percent of the price, add 33.3 percent to a $10,000 cost: $13,333.33. | Markup, against cost: 33.3% |
| 28% margin | To keep 28 percent of the price, add 38.9 percent to a $10,000 cost: $13,888.89. | Markup, against cost: 38.9% |
| 30% margin | To keep 30 percent of the price, add 42.9 percent to a $10,000 cost: $14,285.71. | Markup, against cost: 42.9% |
| 33% margin | To keep 33 percent of the price, add 49.3 percent to a $10,000 cost: $14,925.37. | Markup, against cost: 49.3% |
| 45% margin | To keep 45 percent of the price, add 81.8 percent to a $10,000 cost: $18,181.82. | Markup, against cost: 81.8% |
| 50% margin | To keep half the price, you have to double the cost: a $10,000 cost becomes a $20,000 price. | Markup, against cost: 100% |
| 60% margin | To keep 60 percent of the price, add 150 percent to a $10,000 cost: $25,000. | Markup, against cost: 150% |
| 65% margin | To keep 65 percent of the price, add 185.7 percent to a $10,000 cost: $28,571.43. | Markup, against cost: 185.7% |
| 70% margin | To keep 70 percent of the price, add 233.3 percent to a $10,000 cost: $33,333.33. | Markup, against cost: 233.3% |