Markup vs margin
Markup is what you add on top of cost. Margin is what remains of the price as profit. They are related but not equal: a 25% markup on cost produces a 20% margin on price. Contractors who quote a markup thinking it is their margin are giving away the difference on every job.
The math: price equals cost times one plus markup. Margin is price minus cost, divided by price. So +25% markup on a $100,000 cost before markup gives a $125,000 price, and the $25,000 of profit is 20% of the price, not 25%.
Why does the markup vs margin confusion cost money?
Because targets get set in margin terms (what the business needs to keep) but applied in markup terms (what gets typed into the bid). A contractor who needs a 25% margin must mark up by 33%, not 25%. Applying the wrong one on a $300,000 job leaves five figures on the table.
What does a markup percentage mean for margin?
Zero markup is the cost with nothing added. A +25% markup gives a 20% margin, and a +50% markup gives a 33% margin. You set your own markup, and seeing the cost beside the price keeps the choice explicit.
Price your next job from the same cost data these figures come from, adjusted for where the job is. You set your markup and approve every line before you bid.
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