Markup vs Margin: Formulas, Examples, and a Conversion Table You Can Use Today

Quick answer

Markup is profit divided by cost. Margin is profit divided by selling price. A 50% markup only gives you a 33.3% margin — not 50%. Confusing the two is one of the fastest ways to undercharge. If you want a specific margin, you need a higher markup than you think. The conversion formula is: Markup % = Margin % ÷ (1 − Margin %).

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What is markup?

Markup is the percentage you add on top of your cost to arrive at a selling price.

Formula:

Selling Price = Cost × (1 + Markup %)

Or, if you already know the selling price:

Markup % = (Selling Price − Cost) ÷ Cost × 100

Markup answers: “How much am I adding to my cost?”

Markup example

• Your cost: $8,000 (materials + labor + subs)
• You apply a 50% markup
• Selling price: $8,000 × 1.50 = $12,000
• Profit: $4,000

What is margin?

Margin (profit margin) is profit as a percentage of the selling price — not the cost.

Formula:

Margin % = (Selling Price − Cost) ÷ Selling Price × 100

Margin answers: “What percentage of every dollar I collect is profit?”

Margin example (same numbers)

Using the same job from above:

• Cost: $8,000
• Selling price: $12,000
• Profit: $4,000
• Margin: $4,000 ÷ $12,000 = 33.3%

You marked up 50%, but your margin is only 33.3%. That gap catches people every time.

Why does the difference matter?

Because most business benchmarks, loan applications, and overhead recovery targets are expressed in margin — but most contractors price using markup.

If you set a goal of “30% profit” and apply a 30% markup, you actually earn a 23.1% margin. Over a $500,000 revenue year, that misunderstanding costs you roughly $34,500 in expected profit you never see.

• Markup is your pricing lever (what you control when bidding).
• Margin is your profit reality (what shows up on your P&L).

You need to convert fluently between the two.

When should you think in markup vs margin?

Both numbers are useful — but they serve different purposes.

Think in markup when you are:

• Building an estimate line by line
• Applying a multiplier to cost categories (materials, labor, subs)
• Comparing your pricing approach to what other contractors charge on top of cost
• Setting bid-day multipliers in your estimating software

Think in margin when you are:

• Reviewing profitability after a job closes
• Setting annual or quarterly income goals
• Talking to an accountant, bookkeeper, or lender
• Comparing your business performance to industry benchmarks
• Deciding whether to accept or walk away from a job

The workflow most profitable contractors follow: set a margin target first, convert it to a markup multiplier, then apply that multiplier when pricing each job. After the job wraps, check your actual margin to see if your cost estimates were accurate.

How to convert between markup and margin

Margin → Markup (the one you’ll use most)

Markup % = Margin % ÷ (1 − Margin %)

Example: you want a 25% margin.

• Markup = 0.25 ÷ (1 − 0.25) = 0.25 ÷ 0.75 = 0.3333 → 33.3% markup

Markup → Margin

Margin % = Markup % ÷ (1 + Markup %)

Example: you use a 40% markup.

• Margin = 0.40 ÷ (1 + 0.40) = 0.40 ÷ 1.40 = 0.2857 → 28.6% margin

Markup-to-margin conversion table

Print this out or save it to your phone. It eliminates guesswork during bidding.

Markup %	Margin %	Multiplier (Cost ×)
10%	9.1%	1.10
15%	13.0%	1.15
20%	16.7%	1.20
25%	20.0%	1.25
30%	23.1%	1.30
35%	25.9%	1.35
40%	28.6%	1.40
43%	30.1%	1.43
50%	33.3%	1.50
60%	37.5%	1.60
75%	42.9%	1.75
100%	50.0%	2.00

Key takeaway: To land a 30% margin, you need roughly a 43% markup — not a 30% markup.

Worked example #1: Bathroom remodel

Costs:

• Materials (tile, vanity, fixtures, backer board): $6,200
• Labor (your crew, burdened): $8,500
• Plumbing sub: $3,800
• Dumpster + protection: $900

Total cost: $19,400

Scenario A — 30% markup (common but often too low):

• Price: $19,400 × 1.30 = $25,220
• Gross profit: $5,820
• Margin: $5,820 ÷ $25,220 = 23.1%

Scenario B — 43% markup (targets 30% margin):

• Price: $19,400 × 1.43 = $27,742
• Gross profit: $8,342
• Margin: $8,342 ÷ $27,742 = 30.1%

The difference: $2,522 more profit on the same job, same materials, same labor. Over 10 bathrooms a year, that’s $25,000+ you either capture or leave behind.

Notice that Scenario A feels like “30% profit” — but after overhead (trucks, insurance, office, marketing), you might net only 8–10%. Scenario B gives you actual breathing room.

Worked example #2: Deck build

Costs:

• Pressure-treated lumber + hardware: $4,800
• Concrete footings (materials + labor): $1,200
• Crew labor (burdened): $5,600
• Permits + misc: $600

Total cost: $12,200

	35% Markup	50% Markup
Selling price	$16,470	$18,300
Gross profit	$4,270	$6,100
Gross margin	25.9%	33.3%

If your overhead runs 15% of revenue, the 35% markup job leaves you 10.9% net — tight. The 50% markup job gives you 18.3% net — much more breathing room for warranty work, slow weeks, and the unexpected.

What margin should you target?

There’s no single right answer, but here are industry-typical gross margin ranges:

• Handyman / small repairs: 35–50% margin (higher markup to cover low-ticket overhead)
• Remodeling (kitchen, bath): 28–38% margin
• New construction / GC work: 18–28% margin (higher volume, tighter competition)
• Specialty trades (tile, electrical, plumbing): 30–45% margin

These are gross margins — before your overhead eats into them. If you don’t know your overhead percentage, start by reading our guide on how much to charge for labor, which walks through burden, overhead, and bill-rate math.

How overhead affects your real profit

Gross margin is what’s left after direct job costs. But you still have to pay for everything that keeps the business running:

• Vehicle payments, fuel, and maintenance
• General liability and commercial auto insurance
• Office or shop rent
• Admin and bookkeeping time
• Software subscriptions
• Marketing and lead generation
• Non-billable project management hours
• Warranty callbacks

If your overhead runs 12–18% of revenue (common for small to mid-size remodelers), and your gross margin is only 23%, your net profit is somewhere around 5–11%. That’s thin — one bad job or one slow month can wipe it out.

That’s why the markup-vs-margin distinction matters so much. The contractors who confuse the two usually think they’re making 30% when they’re really netting single digits.

When to raise your markup

Not every job should carry the same markup. Consider adding a risk premium when:

• The scope has unknowns (demolition behind walls, older homes, no existing drawings)
• The schedule is compressed or has hard deadlines with penalties
• The client has a history of changes or indecision
• Access is difficult (multi-story, long material carries, limited parking)
• You’re using a subcontractor or material you haven’t worked with before

A simple approach: set a base markup for your bread-and-butter work, then add 5–15 percentage points for jobs with elevated risk. This protects your margin when surprises inevitably show up.

Common mistakes

1. Treating markup and margin as the same number. A 30% markup is not a 30% margin. Use the conversion formula or table above. 2. Applying markup only to materials. Your markup should cover total job cost — labor, subs, materials, and miscellaneous. If you only mark up materials, you’re giving away labor profit. 3. Forgetting overhead exists. Gross margin is not net margin. Trucks, insurance, admin time, software, marketing — all of that comes out of your gross profit before you see a dime. 4. Using one markup for every job. A straightforward deck replacement and a complex whole-house remodel carry different risk. Adjust your markup accordingly. 5. Discounting without doing the math. A 10% discount on a job with a 30% margin doesn’t cut profit by 10% — it cuts it by a third.

Bid-day checklist

Use this every time you’re about to send a number:

• Did I calculate total job cost (burdened labor + subs + materials + permits + misc)?
• Did I convert my target margin into the correct markup multiplier?
• Did I add a risk bump for job complexity or unknowns?
• Did I back-calculate margin on the final price to confirm it hits my target?
• Does the price pass a market sanity check (not wildly above or below comparable jobs)?
• Did I account for overhead recovery — not just direct job profit?

If every answer is yes, send the bid with confidence.

Pro tips

• Back-calculate margin on every bid before you send it. Take your proposed price, subtract cost, divide by price. If the margin is below your floor, raise the price or decline the job.
• Set a margin floor, not just a markup target. A good rule: never go below 20% gross margin on any job, regardless of how “easy” it seems. Small jobs with low margins can eat up your schedule without moving the needle.
• Track actual margin after each job. Compare estimated vs. actual cost and margin. If you’re consistently landing 5–8 points below estimate, your cost assumptions need updating — probably on labor hours or material waste.
• Use our Contractor Markup Calculator to double-check bids. Punching numbers into a calculator takes 10 seconds and can save you thousands on a single proposal.
• Use the Labor Cost Calculator to build a real burdened labor rate. If your labor cost is guessed, your markup/margin math is perfect on paper and wrong in the field.
• Price change orders at the same or higher margin as the base contract. Change orders carry more disruption than original scope — mobilization, re-sequencing, and sometimes re-ordering materials. Don’t discount them. For a deeper dive, see our guide on how to price a change order.
• Review your markup annually. As overhead changes (new truck payment, added employee, rising insurance), your markup needs to keep pace. A markup that worked two years ago may leave you short today.

FAQs

Is a 50% markup the same as a 50% margin?

No. A 50% markup gives you a 33.3% margin. To reach a 50% margin, you’d need a 100% markup (doubling your cost).

What markup do I need for a 20% margin?

Use the formula: 0.20 ÷ (1 − 0.20) = 0.25. You need a 25% markup.

What markup do I need for a 30% margin?

0.30 ÷ (1 − 0.30) = 0.4286. You need approximately a 43% markup.

Should I mark up subcontractor costs?

Yes. You’re managing the sub, coordinating schedules, handling warranty, and carrying the risk. Most contractors mark up subs 10–25%, though some include subs in overall project markup.

How do I know if my margins are too low?

If you’re busy but not building cash reserves, your margins are probably too low. Calculate your overhead as a percentage of revenue. If your gross margin barely exceeds that overhead percentage, you’re working for near-zero net profit. Another warning sign: you can’t afford to turn down any job, even ones you know will be trouble. That usually means margin is too thin to absorb a single slow month.

Does EstimationPro calculate markup and margin automatically?

Yes. When you build an estimate in EstimationPro, the platform applies your markup rules to total job cost and shows you both the markup percentage and the resulting profit margin — so you always know exactly where you stand before sending a bid.