Profit Tool
Margin, markup, price and profit — solve any one from your cost and see all five at once.
Margin & markup
Margin is profit over price. Markup is profit over cost. Getting them confused is what turns a busy year into a flat one.
Margin is profit over price. Markup is profit over cost. They are only the same number at zero.
$2,000.00
$1,000.00 profit| Margin | Markup |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 35% | 53.8% |
| 40% | 66.7% |
| 45% | 81.8% |
| 50% | 100.0% |
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Margin vs markup
These two numbers describe the same profit against different bases, and the gap between them widens fast. Margin answers “what share of the invoice did I keep?” Markup answers “how much did I add on top of my cost?” A 50% markup sounds bigger than a 33% margin, but they are the same job at the same price.
The formulas
margin = (price − cost) ÷ price markup = (price − cost) ÷ cost price from margin = cost ÷ (1 − margin) price from markup = cost × (1 + markup)
The one that costs people money is the third. To hit a target margin you divide by one minus the margin. Multiplying by one plus the margin gives you a markup instead, and the shortfall grows with every point you add.
Margin to markup conversion
| Margin on price | Equivalent markup on cost |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 35% | 53.8% |
| 40% | 66.7% |
| 45% | 81.8% |
| 50% | 100.0% |
Pro tips
Set your target as a margin, not a markup. Margin is the number that survives contact with your P&L, because it is measured against revenue the same way your accountant measures it.
Price off total cost including overhead, not just materials and labour. A 30% margin on direct costs alone is often a single-digit net margin once the truck, the insurance and the phone are paid.
If a client negotiates 10% off the price, that does not cost you 10% of your profit — it can cost a third of it. Run the number before you agree to it.
Common questions
What is the difference between margin and markup?
Margin is profit measured against the price you charge; markup is the same profit measured against what the job cost you. A $1,000 job sold for $1,500 carries a 50% markup and a 33.3% margin — same money, two different numbers.
How do I calculate price from margin?
Divide, never multiply: price = cost ÷ (1 − margin). A $1,000 cost at a 40% margin is $1,000 ÷ 0.60 = $1,666.67. Multiplying by 1.40 gives $1,400, which is only a 28.6% margin.
What is a good profit margin for contractors?
Most trades aim for 20–35% gross margin on a job, with net landing well below that after overhead. If you are quoting at 10% you have no room for a bad week, and one change order eats the year.
Why does my markup not match my margin?
Because they use different denominators. A 50% markup is a 33.3% margin, and a 100% markup is a 50% margin. Pricing a job as if they were the same is the single most common way a profitable-looking year ends flat.
Does this include overhead?
No — this tool works on the cost figure you enter. If that number is direct costs only, the margin you get is a gross margin. Use the job estimator to add overhead before the margin is applied.