Markup vs margin: what is the difference?
Markup is profit as a percentage of your cost; margin is profit as a percentage of the price. A $100 job that cost you $60 has a 66.7% markup but a 40% margin.
Markup vs margin — Markup is profit as a percentage of your cost; margin is profit as a percentage of the price. A $100 job that cost you $60 has a 66.7% markup but a 40% margin.
In more detail
They describe the same dollars from two directions, which is why mixing them up is so common — and so expensive. If you think you're 'adding 30%' and call it a 30% margin, your real margin is only 23%.
Margin is the number that tells you whether the business survives, because overheads, slow weeks and callbacks are paid from it.
Sales tax should never be counted in either. It's collected on behalf of the government.
What to do about it
- Markup % = (price − cost) ÷ cost.
- Margin % = (price − cost) ÷ price.
- To hit a target margin: price = cost ÷ (1 − margin).
- Check margin on every estimate before you send it, not after the job.
ScopeBid: Estimate & Invoice
Shows price, cost, gross profit, margin and markup separately on every quote, before you send it.
Get it on the App StoreQuestions people ask
- What markup gives a 50% margin?
- 100%. Price has to be double the cost.
- Why is my margin always lower than my markup?
- Because margin divides the same profit by a bigger number — the price, not the cost.