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Markup vs. Margin Converter

Convert between markup and gross margin so you stop pricing below your intended profit.

Your cost
$

Everything the job or the part costs you: burdened labor, material, subs.

Set the price

Markup is profit measured against cost. Margin is profit measured against the selling price. Set one and the other falls out — they are never the same number.

Which one are you starting from?
%

What you add to cost. A 35% markup means you multiply cost by 1.35.

Target margin solver

Work the other direction: name the margin the business needs and see the markup that produces it.

%

Residential service work commonly targets 40% to 55% gross margin on labor.

Sell this at

$1,350

$350 of gross profit — a 35.0% markup on cost, which is a 25.9% margin on the price.
Cost
$1,000
Gross profit
$350
Markup on costMultiply cost by 1.350
35.0%
Margin on priceAlways the smaller of the two numbers
25.9%
Markup for a 45% marginSell at $1,818 instead
81.8%
Markup to margin conversion
Markup on costEquivalent marginMultiplierPrice on $1,000
10.0%9.1%1.100$1,100
15.0%13.0%1.150$1,150
20.0%16.7%1.200$1,200
25.0%20.0%1.250$1,250
30.0%23.1%1.300$1,300
35.0% — your price25.9%1.350$1,350
40.0%28.6%1.400$1,400
50.0%33.3%1.500$1,500
60.0%37.5%1.600$1,600
75.0%42.9%1.750$1,750
100.0%50.0%2.000$2,000
Target margin 45%45.0%1.818$1,818

A 20% markup gives you a 16.7% margin, not 20%

Markup divides profit by cost; margin divides the same profit by the bigger number, the selling price. They can never match. Your 35.0% markup is really a 25.9% margin — 9.1 points less than the markup figure suggests, or $123 of profit on this job alone. Multiply that gap across a year of work and it is frequently the entire net profit of the business.

This price falls 19.1 points short of your target

To hold 45% on a $1,000 cost you need a 81.8% markup and a price of $1,818 — that is $468 more than you are charging now. The shortcut is to divide cost by 0.55 rather than multiplying it by anything.

Markup vs margin conversion chart

Markup is profit divided by cost; margin is profit divided by selling price — they are never the same number. Use margin for pricing decisions; suppliers quote markup.

Markup percentage to equivalent margin and multiplier
Markup on costMargin on priceMultiplierPrice on $1,000 cost
10.0%9.1%1.100$1,100
15.0%13.0%1.150$1,150
20.0%16.7%1.200$1,200
25.0%20.0%1.250$1,250
30.0%23.1%1.300$1,300
35.0%25.9%1.350$1,350
40.0%28.6%1.400$1,400
50.0%33.3%1.500$1,500
60.0%37.5%1.600$1,600
75.0%42.9%1.750$1,750
100.0%50.0%2.000$2,000

Example selling prices use a $1,000 direct cost. Change cost in the calculator to see your job numbers.

What this assumes

  • Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price.
  • A 50% markup equals a 33.3% margin; a 50% margin requires a 100% markup.

Understanding the result

The most expensive confusion in the trades

Adding 20% to cost does not produce a 20% margin — it produces 16.7%. Over a year of jobs, that gap is often the entire net profit of the business. Price to the margin you need and let the markup fall where it falls.

Material markup and labor margin are different

Contractors often mark up materials 20 to 30% and price labor at a shop rate with built-in margin. These are separate calculations. A job with $500 material at 25% markup ($625) and 4 hours at $125/hour ($500 labor) totals $1,125 with very different margin contributions from each line.

The multiplier shortcut

To hit a target margin, divide cost by (1 minus margin). For 30% margin: cost ÷ 0.70. A $700 direct cost job priced at $700 ÷ 0.70 = $1,000 selling price. The markup is 42.9%, not 30%. Memorize the divisors: 20% margin = ÷0.80, 25% = ÷0.75, 30% = ÷0.70.

Stacked markups compound

Marking up a subcontractor's invoice and then marking up the total job double-counts margin. Either mark up the sub's cost once at the job level, or build the sub's margin into their quote. Stacking 20% on materials and 20% on labor separately is fine; stacking on an already-marked-up total is not.

How the math works

Convert between markup on cost and margin on price: margin = markup ÷ (1 + markup). Shows dollar on a sample job when you enter cost and either markup or target margin — prevents double-counting profit.

Where to find each input

  • Direct job cost — labor burdened + materials at cost
  • Target margin percent — from business plan
  • Or habitual markup percent — from habit

Worked examples

50% markup sounds like 50% margin

Cost $1,000, 50% markup → price $1,500.

Margin is 33%, not 50% — tool shows correction table.

Target 25% margin

Cost $2,400.

Price $3,200; equivalent markup 33.3% on cost.

Materials markup only

Labor priced separately, materials cost $800 at 1.35 markup.

Material portion $1,080 — do not apply second margin on whole ticket blindly.

What this does not include

  • Volume discount tiers
  • Sales tax
  • Cash discount terms

Regional adjustment

Competitive pressure varies by market — margin target is policy; local market caps price regardless of math.

Accuracy and references

Standard financial identity used in NAHB markup worksheets; common contractor error called out in PHCC education.

Counterpart bridge

What homeowners see for the same decision

Homeowners use the paired tool for benchmarks and questions before they hire. Align your numbers with what they are already comparing against.

Open Contractor Quote Analyzer

Homeowner counterpart

We publish Contractor Quote Analyzer for the same decision from the customer side — use it to sanity-check how your bid will read against national ranges.

View Quote Analyzer

Common questions

What is the difference between markup and margin?
Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price. A $100 cost with $25 profit: markup is 25%, margin is 20% ($25 ÷ $125). The same dollar profit has different percentages depending on which base you use.
What markup gives a 20% margin?
A 25% markup on cost produces a 20% margin on selling price. Formula: markup = margin ÷ (1 − margin). So 20% ÷ (1 − 0.20) = 25% markup. A $800 cost job needs $1,000 selling price: $200 profit is 25% of cost and 20% of price.
What markup gives a 30% margin?
A 42.9% markup on cost produces a 30% margin. A $700 direct cost job sells for $1,000 ($700 ÷ 0.70). The $300 profit is 42.9% of $700 (markup) and 30% of $1,000 (margin). Use the divisor: selling price = cost ÷ 0.70.
What margin should a contractor target?
Gross margin of 40 to 55% on labor and 20 to 30% on materials is typical for residential service contractors. Net margin after overhead should be 8 to 15%. A contractor targeting 10% net on $500,000 revenue needs $50,000 in bottom-line profit.
How do you calculate gross margin?
Gross margin = (selling price − direct cost) ÷ selling price × 100. A $2,500 job with $1,100 direct cost: ($2,500 − $1,100) ÷ $2,500 = 56% gross margin. Direct cost includes burdened labor and materials — not overhead.
What is a 50% markup in margin?
A 50% markup on cost equals a 33.3% margin on selling price. A $600 cost job at 50% markup sells for $900. Profit is $300, which is 50% of $600 (markup) and 33.3% of $900 (margin).
What markup do contractors use on materials?
Material markup of 15 to 30% is standard for residential contractors. Some shops use flat markup (20% on everything); others use tiered (10% on large equipment, 30% on small parts). Material markup below 15% rarely covers procurement time, storage, and warranty risk.
How much should I mark up subcontractor work?
Mark up subcontractor invoices 10 to 20% to cover coordination, warranty backstop, and payment risk. A $5,000 roofing sub invoice marked up 15% adds $750 to the job. You are selling project management and the customer relationship — that has value.
What is a 100% markup in margin?
A 100% markup (doubling the cost) produces a 50% margin. A $500 cost job sells for $1,000. This is common on small parts and specialty items where procurement time exceeds the part cost. It is not gouging — it is pricing for the service of sourcing.
How do I convert margin to a selling price?
Selling price = direct cost ÷ (1 − target margin). For 35% margin on a $1,200 direct cost job: $1,200 ÷ 0.65 = $1,846 selling price. The $646 profit is 35% of $1,846. Do not multiply cost by 1.35 — that gives only 25.9% margin.
Which should I use daily?
Price from target margin on sell price; convert markup for supplier quotes.
Is 20% margin enough?
Only if overhead is low; many shops need 25%+ gross on mixed jobs.
Markup on subs?
Apply GC policy consistently — some states cap pass-through.
Double margin mistake?
Markup then margin on same base — tool warns when both applied.
Retail vs contractor markup?
Retail margin on shelf price; contractor markup on cost — same math, different base.
Loss leaders?
Model at full margin first, then discount line knowingly.
Estimate software defaults?
Verify whether software uses margin or markup internally.
How teach sales staff?
Sell on value; use margin floor not maximum discount percent.
Material only markup?
Split labor and material pricing policies — common in trade.
Relationship to hourly rate?
Labor rate may embed profit — do not stack identical profit twice.

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