Markup vs. margin: the $1,000 job example
A job costs $1,000. You add 20% and quote $1,200. You have $200 above your included costs, but your margin is 16.67%, not 20%.
Same dollars, different denominator
Markup compares the amount above cost with cost. Margin compares that same amount with the selling price. In this example, $200 ÷ $1,000 is a 20% markup; $200 ÷ $1,200 is a 16.67% margin.
Price for a target margin = cost ÷ (1 − margin ÷ 100)
What price produces a 20% margin?
Divide $1,000 by 0.80. The required price is $1,250. The $250 above cost is 20% of the $1,250 price. This also means a 25% markup on the $1,000 cost.
| Target margin | Price | Equivalent markup |
|---|---|---|
| 10% | $1,111.11 | 11.11% |
| 20% | $1,250.00 | 25% |
| 25% | $1,333.33 | 33.33% |
| 30% | $1,428.57 | 42.86% |
Define your cost before choosing a percentage
Write down which costs are included: materials, labor, subcontractors, delivery, equipment, and any overhead allocation. An amount above materials alone is not net profit. Missing costs can make an attractive-looking percentage misleading.
Use the right tool
The target margin calculator solves for price. The markup calculator adds a percentage to cost. The margin calculator checks a price you already have.
These are arithmetic examples, not recommended margins or a promise of profit. Choose your actual costs and pricing assumptions for the work.
Prepared by JobSiteMath. Worked examples are checked against the calculator tests. Read our methodology.