Contractor Markup vs Margin Explained

Markup answers 'how much do I add to my cost.' Margin answers 'what percentage of the sale price is profit.' They use the same two numbers — cost and profit — but produce different percentages for the same job, and mixing them up is the single most common pricing error in the trades.

Say a job costs you $7,500 to deliver and you want $2,500 profit. Your markup is profit divided by cost: $2,500 / $7,500 = 33%. Your margin is profit divided by price: $2,500 / $10,000 = 25%. Same job, same dollars, two different-looking percentages.

A contractor who wants a 25% profit and applies it as a 25% markup on cost will price that $7,500 job at $9,375 — and only actually collect $1,875 in profit, an 20% margin, not the 25% they thought they were getting. Over a year of jobs, that gap between intended and actual profit is real money, often the difference between a good year and a break-even one.

If you know your cost and want a specific margin, use: Price = Cost / (1 - target margin). For a $7,500 cost and a 25% margin target: $7,500 / 0.75 = $10,000. That's the number that actually delivers 25% margin, not an approximation.

Our Markup Calculator does this conversion automatically — enter your cost and target margin and it hands you the sale price, no mental math required in the middle of a bid.