Ask ten contractors their margin and several will tell you their markup by mistake. The two get used interchangeably, and that confusion is one of the most expensive habits in the trades.
Markup is what you add on top of your cost. Margin is what's left after cost as a share of the price you charged. If a job costs $10,000 and you add 30% ($3,000), you charge $13,000 — but your margin is only 23%, because $3,000 is 23% of $13,000. To actually keep 30%, you mark the cost up about 43%.
The formula worth memorizing: markup = margin ÷ (1 − margin). A 40% target margin needs a 0.40 ÷ 0.60 = 66.7% markup. Price from the margin you need to keep, not the markup that feels normal.
| Net margin | Markup on cost | On $10,000 cost, charge |
|---|---|---|
| 10% | 11.1% | $11,111 |
| 20% | 25.0% | $12,500 |
| 30% | 42.9% | $14,286 |
| 40% | 66.7% | $16,667 |
| 50% | 100% | $20,000 |
Stop pricing from memory
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FAQ
No. A 50% markup means you add half your cost; that's a 33% margin. A 50% margin requires a 100% markup — you double the cost. Mixing them up roughly halves your intended profit.
Price from the margin you need to keep the business healthy, then convert to the markup that achieves it. Margin is the number that pays your overhead and profit; markup is just the lever.