Markup to Margin Chart
Every markup from 5 to 100 percent, with the margin it actually produces. These two numbers are not the same and the gap between them is where small contractors lose money.
Markup is measured against your cost. Margin is measured against the price. Mark a $1,000 cost up 20 percent and the price is $1,200, but the $200 you kept is only 16.7 percent of that $1,200, so the margin is 16.7 percent, not 20.
The gap widens the higher you go. At 50 percent markup the margin is 33.3. At 100 percent markup, which is doubling the price, the margin is only 50. Nothing ever marks up to a 100 percent margin, because that would mean the job cost nothing.
Margin, price and profit at every markup
| Markup | Margin | Price on $1,000 cost | Gross profit |
|---|---|---|---|
| 5% | 4.8% | $1,050.00 | $50.00 |
| 10% | 9.1% | $1,100.00 | $100.00 |
| 15% | 13% | $1,150.00 | $150.00 |
| 20% | 16.7% | $1,200.00 | $200.00 |
| 25% | 20% | $1,250.00 | $250.00 |
| 30% | 23.1% | $1,300.00 | $300.00 |
| 35% | 25.9% | $1,350.00 | $350.00 |
| 40% | 28.6% | $1,400.00 | $400.00 |
| 45% | 31% | $1,450.00 | $450.00 |
| 50% | 33.3% | $1,500.00 | $500.00 |
| 55% | 35.5% | $1,550.00 | $550.00 |
| 60% | 37.5% | $1,600.00 | $600.00 |
| 65% | 39.4% | $1,650.00 | $650.00 |
| 70% | 41.2% | $1,700.00 | $700.00 |
| 75% | 42.9% | $1,750.00 | $750.00 |
| 80% | 44.4% | $1,800.00 | $800.00 |
| 85% | 45.9% | $1,850.00 | $850.00 |
| 90% | 47.4% | $1,900.00 | $900.00 |
| 95% | 48.7% | $1,950.00 | $950.00 |
| 100% | 50% | $2,000.00 | $1,000.00 |
Print this chart
The same table on a sheet of paper, for the truck door, the trailer wall or the back of a clipboard. No signup and no watermark.
Free, no signup, no email, no watermark.
The markup vs margin calculator takes your own measurements and returns the number for your job, plus the material list as a printable document. Every cell in the table above came out of that same calculator, run at build time.
The mistake, in one sentence
A contractor who marks material and labor up 20 percent believing he is making a 20 percent margin is making 16.7, and on a business running 15 percent overhead that is a loss on every job.
This is not an unusual error. It is the single most common reason a busy small builder with a full schedule and good reviews closes the doors, because the volume hides it: more work at a negative number is a faster way down, not a slower one.
Working backwards from the margin you need
Decide the margin first, because margin is what covers overhead and leaves profit, then convert it to the markup you have to apply. The formula is markup equals margin divided by one minus margin. A 30 percent margin needs a 42.9 percent markup. A 40 percent margin needs a 66.7 percent markup.
The margin to markup chart runs that direction in full, which is the more useful direction once you know what your overhead actually is.
Markup on cost means all of the cost
Cost is material, labor including the burden on it, subcontractors, equipment, and the permits and dump fees the job creates. Marking up only the material and paying labor out of the margin is a slow way to work for nothing, and it is common.
The labor cost calculator gives the burdened hourly figure that belongs in the cost side, and the job cost calculator assembles the whole thing and applies overhead and profit at the end.
Questions people ask
What margin is a 50 percent markup?
33.3 percent. A $1,000 cost marked up 50 percent is a $1,500 price, and the $500 profit is a third of that price.
What markup gives a 50 percent margin?
One hundred percent. You have to double the cost, because at a 50 percent margin the profit equals the cost.
Is markup or margin the better number to run a business on?
Margin, because margin is what pays overhead. Markup is the arithmetic you use at the estimating table to hit the margin you decided on.
What markup do contractors normally use?
It varies enormously by trade, by risk and by how much overhead the business carries, and a number that works for a one truck handyman will bankrupt a builder carrying an office. Work out your own overhead rate first, then choose a margin, then convert it to a markup.