1What it costs to run your business
Overhead is every cost you can't charge to one job. Materials, crew wages and subs for a job are job cost, not overhead.
2What you'll sell in the next 12 months
Total you expect to bill clients. Not sure? Use last year's sales (gross receipts on your tax return) and adjust for how this year is going.
3Profit you want to keep
Profit is on top of your pay. It's what the company keeps for slow months, new equipment and the job that goes wrong. 8% is the minimum; 10% is a solid target.
Already know your markup? Price a job or convert it to margin
Enter a job's cost and your markup to get the selling price, or go the other way from a target margin or a finished job.
What do you want to calculate?
Enter cost and markup to find selling price
Materials + labor + subs + expenses
Percentage added on top of cost
Office, insurance, vehicles, admin
Markup to Margin Quick Reference
Common conversions every contractor should know.
| Markup % | Margin % |
|---|---|
| 10% | 9.1% |
| 15% | 13% |
| 20% | 16.7% |
| 25% | 20% |
| 30% | 23.1% |
| 35% | 25.9% |
| 40% | 28.6% |
| 43% | 30.1% |
| 50% | 33.3% |
| 54% | 35.1% |
| 67% | 40.1% |
| 75% | 42.9% |
| 100% | 50% |
Highlighted rows show the markup needed for 30%, 35%, and 40% margin targets.
Quick Answer: Markup vs Margin
Last updated: 2026-03-24
Markup vs margin: Markup is profit divided by cost. Margin is profit divided by selling price. They are never the same number. A 50% markup only gives you a 33.3% margin. A 30% markup gives you just 23% margin. This is the most common pricing mistake contractors make. Enter your cost above to convert markup to margin (or margin to markup) instantly.
What's the Difference Between Markup and Margin?
Markup and margin both measure profit, but from different starting points. Markup is based on your cost. Margin is based on the selling price. That one difference changes everything about how the numbers work.
Worked Example: $20,000 Kitchen Remodel
Say your total cost on a kitchen remodel is $20,000 and you apply a 50% markup.
- Selling price: $20,000 x 1.50 = $30,000
- Gross profit: $30,000 - $20,000 = $10,000
- Markup: $10,000 / $20,000 = 50% (profit / cost)
- Margin: $10,000 / $30,000 = 33.3% (profit / selling price)
You applied a 50% markup, but your actual margin is only 33.3%. That gap catches a lot of contractors off guard.
Why This Matters for Contractors
If you tell your accountant you want a 30% margin but you are applying a 30% markup, you are actually earning 23% margin. Over a year of jobs, that 7-point gap can mean tens of thousands of dollars in missing profit.
The fix is simple: know which number you are using, and convert between them with the calculator above or the Profit Margin Calculator.
Contractor Markup & Margin Guide
The numbers behind profitable contractor pricing. Margin targets by trade, markup conversion shortcuts, and common mistakes to avoid.
What Markup Should a Contractor Use?
Most residential contractors need a 40–67% markup on costs to achieve a healthy 30–40% profit margin.
- 30% margin requires 42.9% markup (multiply cost × 1.43)
- 35% margin requires 53.8% markup (multiply cost × 1.54)
- 40% margin requires 66.7% markup (multiply cost × 1.67)
The most common mistake: confusing a 30% markup with a 30% margin. A 30% markup only yields a 23% margin — well below what most contractors need to cover overhead and profit.
Key Takeaways
- 30% margin = 43% markup (not 30%)
- Residential remodelers should target 30–40% margin
- 30% markup only yields 23% actual margin
Markup vs. Margin: The Critical Difference
Markup is calculated on cost; margin is calculated on selling price. They are never the same number.
- Markup formula: (Selling Price - Cost) ÷ Cost × 100
- Margin formula: (Selling Price - Cost) ÷ Selling Price × 100
- Example: $10,000 cost + 50% markup = $15,000 price = 33.3% margin
To convert: Margin = Markup ÷ (1 + Markup). Or use the shortcut: Selling Price = Cost ÷ (1 - Desired Margin).
Key Takeaways
- Markup is based on cost, margin on revenue
- 50% markup = 33.3% margin
- Price = Cost ÷ (1 - Desired Margin)
Recommended Margins by Contractor Type
Margin targets vary by trade and project type. Service trades command higher margins than general contracting.
- New home builders: 15–25% gross margin
- Commercial GC: 10–20% gross margin
- Residential remodelers: 30–40% gross margin
- Service trades (plumbing, HVAC, electrical): 40–50% gross margin
- Handyman/small jobs: 40–60% gross margin
Gross margin must cover all overhead (office, trucks, insurance, admin staff) AND your net profit. If overhead is 25%, you need 35%+ gross margin to survive.
Key Takeaways
- Residential remodelers: 30–40% gross margin
- Service trades: 40–50% gross margin
- Gross margin must cover overhead + net profit
Markup to Margin Conversion Table
Use this to find the markup that hits your target margin, or to check what margin your current markup is actually producing.
| Markup % | Margin % | Multiplier | $10K Cost Sells For |
|---|---|---|---|
| 10% | 9.1% | 1.10 | $11,000 |
| 20% | 16.7% | 1.20 | $12,000 |
| 30% | 23.1% | 1.30 | $13,000 |
| 43% | 30.0% | 1.43 | $14,300 |
| 50% | 33.3% | 1.50 | $15,000 |
| 54% | 35.0% | 1.54 | $15,400 |
| 67% | 40.0% | 1.67 | $16,700 |
| 100% | 50.0% | 2.00 | $20,000 |
Highlighted rows = common residential remodeler targets (30% and 35% margin).
Markup Mistakes That Cost Contractors Money
- Using markup and margin interchangeably. A 30% markup is not a 30% margin. Contractors who confuse the two consistently underprice jobs without realizing it.
- Setting markup by feel. If your overhead runs 20% of sales and you mark up 25%, you are working for zero: a 25% markup is only a 20% margin. Work out your markup from your overhead first, and re-check it every quarter.
- Lowering markup to win bids. Dropping 5% off your markup to match a competitor often means working for free once overhead is factored in. Compete on value, not price.
- Marking up subs less than everything else. Scheduling, supervising and standing behind a sub's work is real overhead. If a sub's price goes through at a lower markup, the rest of the job has to carry that overhead or it comes out of your profit. Use your full markup on subs and materials.
- Cutting markup on big jobs. A bigger job still ties up your time, trucks and insurance for longer. Keep your markup on large jobs, and set a minimum charge for small ones so a quick service call still covers the trip.
Related Tools
- Burdened Labor Rate Calculator - Calculate your true hourly cost including taxes, insurance, and benefits before applying markup.
- Construction Estimate Template - Build a full line-item estimate, then apply markup at the bottom line.
- Contractor Estimate Template - Professional estimate format with materials, labor, and markup built in.
- Profit Margin Calculator - Calculate profit margin from cost and selling price, or find the selling price needed for a target margin.
How to Use This Calculator
Add Up Your Overhead
Enter what it costs to run the business for a year: your pay for running it, vehicles, insurance, office, advertising, tools. Anything you cannot charge to one job.
Enter Your Sales and Profit Target
Enter the sales you expect over the next 12 months and the net profit you want to keep (8% minimum, 10% is a solid target). The calculator shows the markup you need and what it means on a real job.
Choose Your Calculation Mode
Pick "Cost + Markup" to price a job, "Cost + Desired Margin" to find the markup needed for a target margin, or "Selling Price + Cost" to analyze a completed job.
Enter Your Numbers
Input your total job cost (materials, labor, subs, and expenses). Then enter your markup percentage, target margin, or selling price depending on the mode you chose.
Add Overhead (Optional)
Enter your overhead rate to see net profit after office costs, insurance, vehicles, and admin expenses are factored in.
Review Your Results
See your selling price, gross profit, markup percentage, and profit margin side by side. If overhead is entered, you also get net profit and net margin.
Markup & Margin Formulas
Selling Price = Cost × (1 + Markup%/100)
Selling Price = Cost ÷ (1 − Margin%/100)
Markup% = Margin% ÷ (1 − Margin%/100)
Margin% = Markup% ÷ (1 + Markup%/100)Where:
- Cost
- = Total job cost (materials + labor + subs + expenses)
- Markup%
- = Percentage added on top of cost
- Margin%
- = Profit as a percentage of selling price
- Overhead%
- = Business expenses as a percentage of revenue (office, insurance, admin)
- Net Profit
- = Gross profit minus overhead costs
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Frequently Asked Questions
Why is my 30% markup only giving me a 23% profit margin?
Because markup and margin are calculated differently. Markup is a percentage of your cost, while margin is a percentage of the selling price. A 30% markup on a $10,000 job means you add $3,000 to get $13,000. But $3,000 profit on a $13,000 sale is only 23.1% margin. To hit a 30% margin, you need a 43% markup.
What markup do I need for a 35% profit margin?
You need a 53.8% markup to achieve a 35% margin. The formula is: Markup = Margin / (1 - Margin). So 0.35 / (1 - 0.35) = 0.538, or 53.8%. Use the "Cost + Desired Margin" mode in the calculator above to verify this with your actual job costs.
What should my markup be?
Work it out from your own numbers: markup = 1 ÷ (1 − (overhead % + net profit %)), where both percentages are shares of your annual sales, not your cost. With overhead at 32% of sales and a 10% profit target, that is 1 ÷ 0.58 = 1.72, a 72% markup. This is the method in Michael Stone’s Markup & Profit: A Contractor’s Guide, and the calculator at the top of this page does it for you. Stone gives minimum markups of 1.50 to 1.70 for remodeling, 1.35 to 1.50 for specialty trades and 1.26 to 1.40 for new homes.
Is 10% overhead and 10% profit enough?
No, and it is not even 20%. Adding 10% to cost and then another 10% is a 21% markup (1.10 × 1.10), which is a 17.4% margin. A true 10% overhead plus 10% profit needs a 25% markup. And most remodelers’ overhead runs well above 10% of sales once the owner’s pay for running the business, vehicles and insurance are counted.
Should I include overhead in my markup or track it separately?
Include it. Your markup is the only thing that pays for overhead, so it has to cover overhead and profit. Anything you can charge to a single job (materials, crew wages, subs, permits, dumpsters) goes in the job cost. Anything shared across jobs (your pay for running the business, office, vehicles, insurance, advertising) is overhead, and the markup covers it. If your overhead runs 25% of sales, anything under a 34% markup loses money even on a job that goes perfectly.
How do I price change orders using markup?
Apply the same markup percentage you used for the original bid. Calculate the additional materials, labor, and time, then mark it up consistently. The "Cost + Markup" mode works well for this. Some contractors add a small premium (2-5%) on change orders to account for the disruption to scheduling and workflow.
What if my competitor is charging less than my calculated price?
Do not lower your markup to match. Contractors who underprice to win bids often skip overhead recovery and end up losing money. Instead, focus on communicating value: quality of materials, warranty, licensing, insurance, and track record. If you consistently lose bids, look at reducing your costs (better supplier pricing, efficient crews) rather than cutting your margin.
What is markup in construction contracting?
Markup is the percentage added on top of your total job cost to arrive at the selling price. For example, a $10,000 cost with a 50% markup becomes a $15,000 bid price. Markup covers overhead expenses and profit. It is different from margin, which measures profit as a percentage of the selling price rather than cost.
How do I calculate a 20% markup on materials?
Multiply the material cost by 1.20. A $2,500 material order marked up 20% becomes $3,000. Be careful with separate markups for materials and labor: your overhead does not care which line item paid for it, so a low markup on one category has to be made up somewhere else. Markup & Profit recommends one markup on the whole job cost. Use the "Cost + Markup" mode above to run any markup calculation instantly.
What is markup vs margin in simple terms?
Markup is how much you add on top of your cost. Margin is how much profit you keep from the selling price. If a job costs you $10,000 and you sell it for $15,000, your markup is 50% ($5,000 / $10,000) but your margin is 33.3% ($5,000 / $15,000). Same dollar profit, two different percentages. Markup always looks bigger than margin for the same job.
Is 50% markup the same as 50% margin?
No. A 50% markup produces a 33.3% margin. They sound similar but the math is very different. With a 50% markup on a $10,000 cost, you sell for $15,000 and keep $5,000 profit. That $5,000 is 50% of your cost (markup) but only 33.3% of your $15,000 selling price (margin). To actually achieve a 50% margin, you would need a 100% markup, doubling your cost.
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