FREE CALCULATOR
Markup vs Margin Calculator for Contractors
See the real difference between markup, margin, sell price, and profit before you quote.
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Worked Example
A commercial contractor wants to price a job with direct cost of $10,000.
Using 20% Markup
Targeting 20% Margin
Key insight: A 20% markup gives you 16.67% margin. To get 20% margin, you need 25% markup. They are not the same.
What Most Teams Get Wrong
Markup is based on cost
Markup measures how much you add above cost. It is calculated as profit divided by cost.
Margin is based on selling price
Margin measures how much of the sell price is profit. It is calculated as profit divided by sell price.
They are not interchangeable
20% markup does not equal 20% margin. The math is different—and confusing them costs contractors money.
Discounts reduce margin faster
A 5% discount does not just cut 5% off profit. Margin compression is steeper than many teams expect.
Gross profit is not net profit
This calculator shows gross margin (profit after direct cost). Overhead is not included—you need to cover that too.
Frequently Asked Questions
What is the difference between markup and margin?
Markup is calculated as profit divided by cost. Margin is calculated as profit divided by sell price. Because the denominators differ, the same dollar profit produces different percentages. A $2,000 profit on a $10,000 cost is 20% markup but only 16.67% margin when sold at $12,000.
Why does a 20% markup not equal a 20% margin?
Because margin divides by the larger number (sell price), the result is always smaller than markup when you are profitable. 20% markup on $10,000 produces a $12,000 sell price. Profit of $2,000 divided by $12,000 sell price equals 16.67% margin—not 20%.
Should contractors price with markup or margin?
Both work if you are consistent. Margin is clearer for financial targets because it directly shows what percentage of revenue becomes gross profit. Markup is often easier for estimators to apply. The danger is mixing them up—pricing to what you think is a margin target when you actually applied markup.
Does this calculator include overhead?
No. This calculator shows gross margin—the difference between sell price and direct cost. Overhead, indirect costs, and net profit are separate. To fully protect your business, you need to know your overhead burden and factor it into your pricing. Use the Labor Burden Calculator and Overhead Recovery Calculator for those numbers.
Why do discounts damage margin so quickly?
Discounts come off the top of revenue, not off cost. When you reduce sell price, the entire discount comes from your profit margin. A 5% discount on a 20% margin job can eliminate a quarter of your profit or more. The thinner your starting margin, the more damaging each discount becomes.
THIS CALCULATOR VS FULL QUOTE CONTROL
This calculator helps you check one price. Quoteloc helps your team stop pricing mistakes before the quote is sent.
Protect your floor before discounts. Catch weak pricing before send. Lock approved quotes as reliable records.
WITHOUT QUOTELOC
Markup and margin confused
Discounts applied without margin check
No visibility into real profit impact
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Margin visible on every line
Floor enforced before send
Locked quote = reliable record
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