MATHThe arithmetic

Markup vs margin

Markup is what you add on cost to get a price. Margin is what is left after cost as a share of that price. Mixing the two is how a quote looks healthy and the job does not.

Markup vs margin, without the slogans

Markup answers: what do I add on cost to get a price? Margin answers: after cost, what share of the price is left? They are not interchangeable. A 30% markup is not a 30% margin.

If you cannot say which number you used, the client is not the problem. The arithmetic is.

A marked example on Oak Street

The Oak Street quote total is 1,105 sample currency units. Suppose the costs behind that price were 850 — labour, materials and the other costs that belong to this job. Profit is 255.

Margin is 255 ÷ 1,105, about 23%. Markup is 255 ÷ 850, 30%. Same job. Different fractions. Those cost figures are a marked example for the arithmetic — not a rate card for your area.

Which one you put on the quote

Price from cost, then check margin. If you start from a margin target and forget the formula, you will under-price. If you apply markup and then talk about margin as if they were the same, you will over-promise to yourself.

Run the profit margin calculator with your own revenue and costs before you send the quote. Do not invent an hourly rate you do not use.

Where this sits next to job costing

Job costing is the buckets: labour, materials, other. Markup vs margin is what you do with those buckets when you set a price. How to price a job is the order of operations.

If actual hours blow the plan, the margin you calculated on Tuesday is not the margin on Friday. Record the actuals or the next quote is still a guess.

Use the next page

FAQCommon questions

Common questions

Is a 50% markup a 50% margin?

No. A 50% markup on 100 of cost is a price of 150, which is a 33% margin. Write both numbers once so you stop mixing them.

Should I show markup to the client?

No. Show scope, lines and a total. Markup is how you got there. Margin is how you know it was worth doing.

What if I do not know the cost yet?

Then it is an estimate range, not a quote. Cost what you can see, range the rest, and say so on the page.

Check the margin before you send it

Use the calculator with your own figures, then write the quote so the hours still have somewhere to live.