Markup Calculator for Contractors: Markup vs Margin
You added 25% to the job, the client signed, and at the end there was less left than you expected. Often that's the markup and margin mix-up: 25% on top of cost is only 20% of the price. Enter a job below and see the price to quote, your real margin, and what's left after overhead.
Price to quote
—
— markup = — margin
Where the price goes
Markup you need for each margin
| Margin | Markup | Quote |
|---|
Quick answer: markup is profit ÷ cost; margin is profit ÷ price. A $10,000 job sold for $12,500 has a 25% markup and a 20% margin. To turn a margin into a markup: markup = margin ÷ (1 − margin). A 25% margin needs a 33.3% markup.
Markup vs margin: what's the difference?
Markup and margin describe the same profit. The only difference is what you divide it by. Markup compares the profit with what the job cost you. Margin compares it with what the client pays. Because the price is always bigger than the cost, the margin is always the smaller of the two percentages.
It matters because your overhead and your profit goals are usually shares of revenue, like "overhead runs 10% of sales" or "I want 10% net". Those are margin numbers. If you add them to cost as a markup, you fall short every time.
How to calculate markup vs margin on a job
Here is the job the calculator starts with:
- Add up the job cost. Materials $4,800, labor $3,600, subcontractors $1,200 and $400 for equipment and permits: $10,000.
- Apply the markup. A 25% markup: $10,000 × 1.25 = $12,500 to quote.
- Find the gross profit. $12,500 − $10,000 = $2,500.
- Find the margin. $2,500 ÷ $12,500 = 20%. That's the share of the price you keep before overhead.
- Take out overhead. If overhead runs 10% of revenue, this job has to carry $1,250 of it. What's left is $1,250 of net profit, 10% of the price.
If you had wanted a 25% margin, you would need to quote $10,000 ÷ 0.75 = $13,333.33, a 33.3% markup. Using 25% markup instead leaves $833.33 on the table on this one job. Across a year of jobs, that's real money.
Markup to margin conversion table
The markups contractors use most often, and the margin each one really gives:
| Markup on cost | Margin it gives | Price on a $10,000 job |
|---|---|---|
| 10% | 9.1% | $11,000 |
| 15% | 13.0% | $11,500 |
| 20% | 16.7% | $12,000 |
| 25% | 20.0% | $12,500 |
| 30% | 23.1% | $13,000 |
| 33.3% | 25.0% | $13,333 |
| 40% | 28.6% | $14,000 |
| 50% | 33.3% | $15,000 |
| 75% | 42.9% | $17,500 |
| 100% | 50.0% | $20,000 |
Going the other way, from the margin you want to the markup you need to add, the calculator's result panel shows the table for your own job.
How to calculate markup percentage from cost and price
If you already have a price and want to know what markup you're charging, subtract the cost from the price and divide by the cost:
A bathroom remodel that costs you $6,400 and is quoted at $8,000 has a markup of $1,600 ÷ $6,400 = 25%, and a margin of $1,600 ÷ $8,000 = 20%. In the calculator, type the quote into the "Price" box and both percentages appear.
How to calculate contractor markup
Start from what the markup has to pay for, not from a number someone told you. Every job has to cover its own costs, a share of your overhead and your profit:
- Find your overhead as a percentage of revenue. Last year's overhead (office, insurance, vehicles, software, office staff, your salary if you don't work on the jobs) divided by last year's revenue.
- Add the net profit you want. 12% overhead plus 10% profit is a 22% margin.
- Turn that margin into a markup. 0.22 ÷ (1 − 0.22) = 28.2%. Put that in the calculator's "Markup" box, or type 22 in "Margin".
The "10 and 10" trap. Many general contractors add 10% overhead and 10% profit on top of cost, one after the other: cost × 1.10 × 1.10. That is a 21% markup, which is a 17.4% margin. If overhead really runs 10% of revenue, what's left is 7.4% profit, not the 10% you planned. To actually keep 10 and 10, divide the cost by 0.80, which is a 25% markup.
Rough markups you'll often hear quoted for small contractors run from about 15% on large, simple jobs to 50% or more on small service calls and repairs. Treat that as a rough guide only; your overhead decides the number, not the trade average.
Why a small discount hurts more than it looks
Discounts come off the price, so they come straight out of your margin. Take the $12,500 job with a 20% margin. A 10% discount brings the price to $11,250; the cost is still $10,000, so the profit drops from $2,500 to $1,250 and the margin from 20% to 11.1%. You gave away 10% of the price and half of the profit. After 10% overhead, the job barely breaks even.
Put the markup on every quote and see the margin before you send it
The calculator prices one job. The mix-up usually happens on the fortieth quote of the year, at night, when you add a round percentage and move on. OwnDesk Contractor builds it into the quote: each line has its unit cost and its own markup percentage, a default markup is filled in on every new line, and the quote shows its total cost and gross margin, in money and as a percentage, before the client ever sees it. Once the job is won, it keeps a live margin: contract plus approved change orders, minus the expenses and crew hours you log against it.
It's a one-time payment with no subscription, it works offline, and it also runs the work orders with client e-signature, permits and inspections, and invoicing. There are trade editions with the same quoting for electricians, plumbers, HVAC contractors and flooring installers.
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Frequently asked questions
What is the difference between markup and margin?
Is a 25% markup the same as a 25% margin?
How do I convert markup to margin?
How do I convert margin to markup?
How do you calculate markup percentage?
What markup should a contractor use?
How do general contractors calculate overhead and profit?
Should I use a different markup on materials, labor and subcontractors?
Is this markup calculator free?
Quote with a markup, check the margin
OwnDesk Contractor puts a markup on every quote line and shows the gross margin before you send it, then tracks each job's real margin as costs come in. One payment, no subscription.