This is the most expensive misunderstanding in the trades. Markup and margin sound interchangeable, they're not, and the difference is real money on every single job. If you set prices thinking in one while you need the other, you under-earn without ever knowing why.
The two definitions
- Markup is profit as a percentage of your cost. Cost $100, sell for $150 → 50% markup.
- Margin is profit as a percentage of the price. Sell for $150 with $100 cost → $50 profit ÷ $150 = 33% margin.
Same job, same dollars — but "50% markup" and "33% margin" describe the exact same transaction. The percentages differ because they're measured against different numbers.
Why it matters
Most contractors think in terms of "what do I add on?" — that's markup. But the number that tells you whether the business survives is margin, because overhead comes out of the price. If you need a 40% margin to cover overhead and profit, but you set a 40% markup, you're actually running a 29% margin and coming up short on every job.
The conversion table
| Markup | Equals this margin |
|---|---|
| 25% | 20% |
| 50% | 33% |
| 67% | 40% |
| 100% | 50% |
| 150% | 60% |
The formulas: margin = markup ÷ (1 + markup), and to hit a target margin, markup = margin ÷ (1 − margin). Want a 40% margin? Mark up 67%.
Put it into your pricing
Decide the margin your business needs to cover overhead and pay you, then convert it to the markup you apply on the job. Every QuoteAnyJob estimate template has a markup field, so once you know your number the totals handle the math. Pair this with a solid estimate and you'll price jobs that actually keep the lights on.