Markup vs. Margin Calculator
Markup is a percentage of cost. Margin is a percentage of price. Confusing the two is the most expensive arithmetic mistake in contracting — this converts between them instantly.
Convert markup ↔ margin
Type in any one of markup, margin or sell price — the other two follow.
At 20.0% markup you keep 16.7% of the money that comes in. To actually make 20.0% margin you'd need to mark up 25.0%.
Markup to margin conversion table
| If you mark up | Your gross margin is |
|---|---|
| 5% | 4.8% |
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 35% | 25.9% |
| 40% | 28.6% |
| 45% | 31.0% |
| 50% | 33.3% |
| 60% | 37.5% |
| 75% | 42.9% |
| 100% | 50.0% |
Knowing the margin isn't the same as keeping it
This job sells at $12,000.00 with $2,000.00 of gross profit in it. Whether that profit survives the job is a different question — SiteAnchor tracks every material receipt, labor hour and change order against this number as the work happens, so you find out in week two instead of at the closeout.
Why the two get confused, and what it costs
A contractor who adds 20% to every job and believes they're making a 20% margin is making 16.7%. That gap sounds academic until you scale it: on $800,000 of annual volume it's roughly $27,000 of profit that was never in the price in the first place. It isn't a bookkeeping error — the jobs were priced light from the beginning, and no amount of good field management recovers it.
The trap is that both numbers are quoted as percentages of something, and nobody says which. Your accountant reports margin, because that's how an income statement reads. Your estimate is built on markup, because that's what you apply to a cost. Both are correct, and they never match.
Two rules make it hard to get wrong: margin is always the smaller number, and the conversion is margin = markup / (100 + markup). Decide your target as a margin, since that's what determines whether the business survives, then convert to the markup you'll actually type into the estimate.
Common questions
What is the difference between markup and margin?
Markup is a percentage of your cost; margin is a percentage of your sell price. On a $10,000 job marked up 20%, you sell at $12,000 and keep $2,000 — which is 20% of the cost but only 16.7% of the price. The margin is always the smaller number.
What margin does a 20% markup give you?
16.7%. The formula is margin = markup / (100 + markup). A 25% markup gives 20% margin, a 50% markup gives 33.3%, and a 100% markup gives 50%.
What markup do I need for a 30% margin?
42.9%. Going the other way, markup = margin / (100 - margin). For a 20% margin you need 25% markup; for a 40% margin, 66.7%; for a 50% margin you need to double your cost.
What is a good profit margin for a construction company?
Gross margins of 20–35% are common on residential work and tighter — often 10–20% — on competitive commercial bids. What matters more than the benchmark is that the margin is calculated on fully burdened cost. A 25% margin on a labor cost that ignored payroll taxes, workers' comp and unbillable hours isn't a 25% margin.
Should I mark up materials and labor at the same rate?
Plenty of contractors don't — labor carries more risk and more overhead, so it often takes a higher markup than materials. The arithmetic here works the same either way; run each category separately if that's how you price.
None of this works on the wrong cost. The most common reason a margin evaporates isn't the markup — it's a labor line built on the wage rather than the burdened cost, which runs 25–40% higher once taxes, insurance and unbillable hours are counted. Run yours through the labor burden calculator, then price the job with the free construction estimate generator.
To watch a margin hold up while the job runs rather than finding out at closeout, see job costing or check pricing.
More free tools
All free, all no-signup. See every free tool →
- Estimate GeneratorBuild a branded construction estimate with line items, markup and tax, and download it as a PDF. No account, no email.
- Change Order GeneratorTurn a scope change into a signature-ready change order PDF with the cost breakdown and revised contract total worked out for you.
- Payment ApplicationFill in a schedule of values and get an AIA-style G702/G703-format application for payment — continuation sheet, retainage and payment due all calculated.
- Labor BurdenWork out what an hour of an employee's time really costs you once taxes, insurance, benefits and unbillable hours are counted.