Free tool
Markup vs margin calculator
Markup is profit as a percentage of what a job cost you; margin is the same profit as a percentage of what the customer paid. They are never the same number, and markup is always the larger one: adding 20% to your costs makes a 16.7% margin, and reaching a 20% margin takes a 25% markup. This converts between them and works out the sell price a target actually needs, so a job is priced on the number you meant.
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Markup against margin
The same job, two different percentages
Nothing is sent anywhere and nothing is stored. Markup is over cost, margin is over the sell price, and the second is always the smaller number.
Check a job you have priced
What it costs you, and what the customer is paying.
Margin
20.0%
of the sell price
Markup
25.0%
on top of cost
Gross profit
£200.00
Before overheads. This is the gross figure, not what lands in the business.
Price a job to a target
Same cost as above. The two prices below are what the same number gets you, depending which one you meant.
To make 25.0% margin, charge
£1,066.67
That is a 33.3% markup on your cost.
Adding 25.0% to cost instead gives
£1,000.00
Which is a margin of 20.0%, not 25.0%.
£66.67 a job
The gap between the two prices, on this one job. Multiply it by the number of jobs you price in a year to see what the confusion is worth.
Estimark reports margin, over the sell price, on every quote and every job, and tells you how much of a quote it could not cost rather than treating an uncosted line as free. How job costing works in Estimark.
Markup and margin: how do they differ?
The base. Markup is the profit as a percentage of what the job cost you; margin is the same profit as a percentage of what the customer paid. The same job produces two different numbers, and markup is always the larger one.
- Adding 20% to your costs makes a 16.7% margin, not a 20% one.
- To make a 20% margin you have to add 25% to cost.
- Markup has no ceiling. Margin cannot reach 100%, because that would mean the work cost nothing.
| Markup on cost | The margin it actually makes |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 30% | 23.1% |
| 50% | 33.3% |
| 100% | 50% |
Which one should a contractor quote in?
Margin, because it is the figure that compares to everything else in the business. Turnover, overhead recovery and the accounts are all percentages of revenue, so a profit measured against cost does not sit alongside them.
- Merchants and suppliers usually talk in markup, so a rate quoted to you and the rate you report may not share a base. Ask which one is meant.
- Estimark reports margin, over the sell price, on every quote and every job.
- Whichever you use, say which. A percentage with an unstated base is the thing that causes this error in the first place.
Is gross margin the same as profit?
No. Gross margin is what is left after the direct cost of doing the work, and overheads have not come out of it yet.
- Vans, insurance, an office, a phone system and the time spent quoting all come out of gross profit before anything is left.
- A firm can run at a healthy gross margin and still lose money. The figure has to be watched per job and in total.
- A line with no cost recorded against it is not a line that costs nothing. Treating it as free reports a 100% margin on it and inflates the whole job.
This calculator works on the figures you give it. It cannot know whether your cost is a full cost.
Common questions
- Is markup the same as margin?
- Markup is profit as a percentage of cost. Margin is the same profit as a percentage of the sell price. A 50% markup is a 33.3% margin, and a 20% markup is a 16.7% margin, so the two are never interchangeable and markup is always the larger figure.
- What markup do I need for a 20% margin?
- 25%. To reach a target margin, divide the margin by one minus the margin: 20% margin needs a 25% markup, 30% margin needs 42.9%, and 50% margin needs 100%.
- If I add 20% to my costs, what margin am I making?
- 16.7%. Adding 20% to a £1,000 cost gives a £1,200 price, and the £200 profit is 16.7% of £1,200. The gap looks small on one job and compounds across every job priced that way.
- Can margin be more than 100%?
- No. A 100% margin would mean the work cost nothing at all, so there is no price that reaches it. Markup has no such limit: doubling your money is a 100% markup and tripling it is 200%.
- Does this calculator store anything?
- No. The arithmetic runs in your browser. Nothing is sent to a server, nothing is stored, and there is no email address to give.
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Margin on every quote and every job, over sell, with uncosted lines named rather than assumed free.
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