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Markup vs margin

Markup is a share of your cost. Margin is a share of the price. They are never the same number, and treating them as if they were is where a year's profit quietly goes.

Applied as
PRICE TO CHARGE
1,200.00
PROFIT
200.00
MARKUP
20.0%
MARGIN
16.7%

20.0% markup is 16.7% margin. Charging a 20% markup when you meant a 20% margin leaves 50.00 on the table on this job alone.

Why they get mixed up

Both are quoted as a percentage and both describe the gap between what a job costs you and what you charge. The difference is what the percentage is measured against.

Add 20% to a $1,000 cost and you charge $1,200 — that's a 20% markup, but $200 of $1,200 is a 16.7% margin. To actually keep 20% of the price you have to charge $1,250.

On one job it's $50. On a hundred jobs it's the difference between a good year and a flat one. In MeloDocs your rates carry the markup you set, so the quote comes out at the number you meant.

Describe a job. See what comes out.

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