Updated June 3, 2026
Markup vs. Margin: How to Price a Job So You Actually Make Money
Most contractors who feel like they're "busy but broke" are losing money to one small mistake: pricing with markup but thinking in margin. They sound similar and they are not the same number. Here's the difference, why it matters on every job, and how to set a markup that hits the profit you actually want.
TL;DR
Markup is how much you add on top of your cost. Margin is how much of the final price you keep as profit. A 20% markup is only a 16.7% margin — not 20%. To hit a target margin, divide the margin by (1 minus the margin) to get the markup you need. A 30% margin requires a 42.9% markup, not 30%.
The two numbers, in plain English
Say a job costs you $1,000 in materials and labor and you sell it for $1,200. Your profit is $200. Both of these describe that same job:
- • Markup = profit ÷ cost. $200 ÷ $1,000 = 20% markup. This is the number you add on top.
- • Margin = profit ÷ price. $200 ÷ $1,200 = 16.7% margin. This is the slice of the final price you actually keep.
Same job, same $200 — two different percentages, because they divide by different things. Markup divides by your cost; margin divides by the price the customer pays. Margin is always the smaller number, and it's the one that tells you whether the business is healthy.
Why the mix-up costs you real money
The trap sounds like this: "I add 20% to every job, so I'm making 20%." You're not. You're making 16.7%, and after overhead — truck, fuel, insurance, phone, the hours you spend quoting — that thinner-than-expected margin is often where a "busy" year ends with very little left over.
The gap widens as your markup grows. A 50% markup feels aggressive, but it's only a 33% margin. If you need to clear 40% to cover overhead and pay yourself, a 50% markup quietly leaves you short on every single job.
Markup → margin conversion
If you price by adding a fixed markup, here's the margin you're really getting:
| Markup you add | Margin you actually keep |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 40% | 28.6% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
Target margin → markup you need
More useful in practice: decide the margin you need to stay healthy, then read off the markup that gets you there. The formula is markup = margin ÷ (1 − margin).
| Margin you want | Markup to apply |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 35% | 53.8% |
| 40% | 66.7% |
| 50% | 100.0% |
A worked example
Your hard cost on a deck rebuild is $6,000 (lumber, hardware, and labor).
You want a 35% margin so the job carries its share of overhead and still pays you.
Required markup = 0.35 ÷ (1 − 0.35) = 53.8%.
Sell price = $6,000 × 1.538 = $9,228.
Profit = $3,228, which is 35% of $9,228. If you had "added 35%" instead, you'd have priced it at $8,100 and kept only a 25.9% margin — about $1,100 less on one job.
How to set your number
- 1. Start from the margin, not the markup. Add up your yearly overhead and the pay you want, divide by expected revenue, and that's the margin you need to hold across jobs.
- 2. Convert it to a markup multiplier using the table above, and apply that multiplier to your true cost — materials, labor, and any equipment or subs.
- 3. Check the margin after the fact. Quoting and actual results drift apart. Track cost vs. price on finished jobs so you can see which kinds of work hold your margin and which ones don't.
Common questions
Is a "good" margin the same for every trade?
No. Material-heavy trades and labor-heavy trades carry different overhead, so a healthy margin for a painter isn't the same as for a roofer. Use your own overhead and target pay, not a number you heard on a forum.
Should I mark up materials and labor the same?
Many contractors mark them up differently — for example a higher markup on materials to cover handling and waste. What matters is that the blended result hits the margin you need on the whole job.
Do I have to show my markup to the customer?
No. You can present a single lump-sum price instead of itemized costs so your markup and rates stay private. Your internal cost is for you, not the invoice.
Run the numbers on your next job, then keep track of the margin you actually hit.
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