Key takeaways
- Markup is added on top of your cost; margin is profit as a share of the selling price.
- A 30% markup is only about a 23% margin — and the gap matters more on bigger jobs.
- Set your price however you like, but always judge the job by its margin.
- Convert with: margin = markup ÷ (1 + markup).
Short version: markup is a percentage added to your cost. Margin is your profit as a percentage of the price you charge. They're always different numbers, and assuming they're the same makes you undercharge.
What's the difference between markup and margin?
Both describe profit, but from different starting points:
- Markup = profit ÷ cost
- Margin = profit ÷ price
Cost is what you pay. Price is what the customer pays. Since price is always bigger than cost, margin is always a smaller percentage than markup.
A quick example
Say a job costs you $1,000 and you add a 30% markup:
Cost $1,000 + 30% markup = price $1,300. Your profit is $300. But $300 ÷ $1,300 = a 23% margin — not 30%.
You marked it up 30%, but you only kept 23% of the price. That gap is real money.
Why this costs contractors money
Here's the trap: you decide you want to "make 30%," you apply a 30% markup, and you think you hit your target. You didn't — you made 23%. Do that on every job and you're quietly leaving a chunk of profit on the table all year. It's an easy mistake to bake into your job pricing without ever noticing.
So which should I use?
Use whichever is easier to set your price — but always check the margin afterward, because margin is what actually lands in your pocket. If you target a margin, work backward to the price; if you prefer markup, convert it so you know the real margin.
This is exactly what JobPricer does for you: enter your overhead once and every quote shows labor, materials, overhead, and your real profit before you hit send.
Try it free →Frequently asked questions
Is markup the same as profit margin?
No. Markup is profit as a percentage of your cost; margin is profit as a percentage of the price. A 50% markup, for example, is only a 33% margin.
What markup should a contractor use on materials?
Material markup commonly runs 15–35%, depending on the trade and how much handling, sourcing, and risk is involved. Pick a number that covers your time and the risk of fronting the cost.
How do I convert markup to margin?
Use margin = markup ÷ (1 + markup). A 30% markup → 0.30 ÷ 1.30 ≈ 23% margin.
CWritten by Craig, founder of JobPricer
I ran a contracting business and finished 500+ jobs before I built JobPricer. Everything here is what I wish someone had told me when I started quoting.