Markup vs. Margin
Two different ways to express the difference between cost and price — and they're not the same number.
Markup is the price increase ON TOP of cost, expressed as a percentage of cost. Margin is the profit AS A PERCENTAGE OF PRICE. They're different math, and confusing them quietly erodes profit.
Quick rule: a 50% markup is only a 33% margin. A 100% markup (doubling your cost) is a 50% margin. A 25% margin requires a 33% markup.
Most contractors who think they're running 30% profit are actually running 30% markup, which is only a 23% margin.
Examples in the field
- Cost style="max-width:780px;margin:0 auto;padding:48px 24px;font-family:system-ui,-apple-system,sans-serif;line-height:1.55;color:#0f172a"00, sold for style="max-width:780px;margin:0 auto;padding:48px 24px;font-family:system-ui,-apple-system,sans-serif;line-height:1.55;color:#0f172a"50 — 50% markup, 33% margin.
- Cost style="max-width:780px;margin:0 auto;padding:48px 24px;font-family:system-ui,-apple-system,sans-serif;line-height:1.55;color:#0f172a"00, sold for $200 — 100% markup, 50% margin.
- Cost style="max-width:780px;margin:0 auto;padding:48px 24px;font-family:system-ui,-apple-system,sans-serif;line-height:1.55;color:#0f172a"00, sold for style="max-width:780px;margin:0 auto;padding:48px 24px;font-family:system-ui,-apple-system,sans-serif;line-height:1.55;color:#0f172a"33 — 33% markup, 25% margin.
Related
- Overhead — The cost of running the business that isn't tied to any specific job — rent, insurance, software, your truck, the time you spend quoting.
- Cost-Plus Contract — A contract where the customer pays actual costs plus a fee — either a fixed dollar amount or a percentage of costs.
- Fixed-Price (Lump-Sum) Contract — A contract where the contractor agrees to a single total price for the defined scope, taking the risk on cost overruns.
- Compare contractor CRMs — FieldKrew against Jobber, Housecall Pro and ServiceTitan
- Retainage — A percentage of each progress payment (typically 5-10%) that the owner or GC withholds until the job is fully complete and accepted.
- Draw Schedule — A pre-agreed payment schedule for a construction project, tied to milestones or percentage of completion.