Markup vs margin calculator

1. Enter what the job costs you — materials plus direct labour, before overhead.
2. Say whether the percentage in your head is a markup or a margin. Most people say margin and price as markup.
3. Enter your target percentage.
4. Enter how many jobs like this you do in a month, so the error can be annualised.
5. Read the price to quote, then read the panel showing the cost of getting it the wrong way round.

The conversion table underneath is worth screenshotting. The relationship is not linear — the gap between markup and margin is small at 10% and enormous at 60%, which is why high-margin trades lose the most from the confusion.

Markup answers: how much did I add to my cost? Margin answers: how much of the price I charged was profit? The base changes, so the number changes, even though the money is identical.

Take a job costing you a thousand dollars that you sell for fourteen hundred. Your profit is four hundred. As a markup, that is four hundred over a thousand — forty percent. As a margin, it is four hundred over fourteen hundred — twenty-eight and a half percent. One job, one profit, two correct percentages.

The trouble starts when the two words get used interchangeably in the same business. A supplier quotes you trade prices assuming markup, your accountant reports margin, and you price by adding a percentage you learned from someone who meant the other one. Nobody is lying and the money still goes missing.

Margin is the more useful number because it is a share of revenue, and every other figure in your business is also a share of revenue. Your overhead is a percentage of revenue. Your tax is calculated on revenue less costs. When your accountant tells you the business made twenty-two percent, they mean margin.

Markup is easier to apply in the moment — you have a cost in front of you and you multiply. That convenience is exactly why it persists on building sites and in workshops, and there is nothing wrong with using it as long as you know the margin it produces.

The practical answer: decide your target margin, because that is the number that has to cover your overhead and leave a profit. Then convert it once into the markup you will actually apply, write that number on the inside of your quoting folder, and use it. The conversion table on this page exists for exactly that.

At a ten percent target the two are nearly the same: a ten percent margin needs an eleven point one percent markup. Confusing them costs you a rounding error, and plenty of businesses never notice.

At forty percent, a forty percent margin needs a sixty-six point seven percent markup. Applying forty percent instead leaves you at twenty-eight point six — you have given away more than a quarter of your intended profit.

At sixty percent, a sixty percent margin needs a hundred and fifty percent markup. Applying sixty percent gets you to thirty-seven point five. You are making less than two-thirds of what you planned, on every job, forever.

This is why the error is most expensive in exactly the trades that ought to be most profitable — specialist work, consultancy, anything with a high skill component and low material cost. The businesses with the most to lose are the ones where the mistake is largest.

The profit figure here is gross: revenue minus the direct cost of doing the job. Out of it comes everything that keeps the business running whether or not you work today — the van, the insurance, the phone, the accountant, your unbilled hours.

A business running a forty percent gross margin with overhead consuming forty-five percent of revenue is losing money on every job while feeling profitable on each one. That combination is common and it takes a surprisingly long time to notice, because each individual job looks fine.

The habit worth building: know your overhead as a percentage of revenue, and treat your target margin as overhead percentage plus the net profit you actually want. If overhead is thirty percent of revenue and you want fifteen percent net, your target gross margin is forty-five, not thirty.

• Convert once, write it down. Decide your target margin, convert it to the markup multiplier, and write the multiplier where you quote from. "Cost × 1.67" is harder to get wrong than remembering a percentage relationship under time pressure.
• Check completed jobs, not quotes. After every tenth job, take the invoice and the real costs and compute the actual margin. Quotes reflect intention; invoices reflect what happened, and the gap between them is where the money is.
• Say which one you mean, out loud. When you talk about percentages with a supplier, a partner or an accountant, say "forty percent margin" or "forty percent markup" every time. It sounds pedantic for a week and then it saves you an argument.

None of this is complicated, which is exactly why it is worth fixing today. It is one of very few improvements available to a small business that costs nothing, takes an hour, and applies to every job from now on.