What Is Markup?

By BRIX Editorial Team · Updated October 12, 2026

Markup is the amount added to a job's cost to set its selling price, usually stated as a percentage of cost. Markup % = (Price − Cost) ÷ Cost × 100. A water heater that costs a plumber $700 and sells for $980 carries a $280 markup, or 40%. Markup has to cover overhead and profit.

Key takeaways

Markup is measured against cost. Margin is measured against price. The same job always shows a bigger markup than margin.
Price = Cost × (1 + Markup %). A 50% markup on $1,000 of cost is a $1,500 price.
Markup has to pay for overhead (trucks, office, insurance, phones) and still leave profit. If it only covers overhead, you worked for free.
Most trades shops use different markups for materials, equipment, subcontractors and labor rather than one number for everything.
Small, cheap parts usually need a higher markup percentage than big-ticket equipment, because the cost of handling them doesn't shrink with the price.

How does markup work?

Markup works by starting from what a job costs you and adding a percentage on top to reach the price the customer pays. The added dollars are your gross profit on that item. They're the only money available to pay overhead and leave a profit, so the markup you pick decides whether the job is worth doing.

Take a roofer quoting a full tear-off and replacement. Shingles, underlayment, flashing and vents come to $5,200. The crew's burdened labor for three days is $3,800. Dumpster and permit add $600. That's $9,600 of direct cost. If the roofer prices the job at $14,000, the markup is $4,400 on $9,600 of cost, or about 45.8%.

Markup formulas

Markup % = (Price − Cost) ÷ Cost × 100   |   Price = Cost × (1 + Markup %)

Cost: everything the job costs you directly: materials, equipment, subcontractors and burdened field labor
Price: what the customer pays, before sales tax
Markup %: written as a decimal in the second formula (40% = 0.40)

Want to check your own numbers? The markup and margin calculator converts in both directions, and the job pricing calculator builds a full price from materials, labor hours and overhead.

How much do contractors mark up materials?

There is no single industry markup on materials, because the right number depends on your overhead, your job size and what your market will pay. What does hold across trades: the markup has to recover the real cost of buying, picking up, storing, carrying and warrantying the part, plus profit. A $4 fitting costs you about as much time to source as a $40 one, so cheap parts need a bigger percentage.

That's why many shops use a sliding-scale (tiered) markup instead of a flat percentage. Here's what one looks like. The tiers below are an example to show the shape, not a recommendation; build yours from your own overhead.

Example sliding-scale markup on parts (illustrative)
Your cost per part	Example markup	Example price	Gross profit dollars
$5	200%	$15	$10
$25	120%	$55	$30
$100	75%	$175	$75
$500	45%	$725	$225
$2,500	30%	$3,250	$750

Percentages fall as cost rises, but profit dollars still climb. Those dollars are what pay the bills.

What should you mark up on a job?

Mark up every cost that you buy, manage or carry risk on: materials, equipment, subcontractors, rentals, permits you pull and disposal. Labor is marked up too, but usually through your billable hourly rate rather than a line-item percentage. Leaving any cost bucket at zero markup quietly lowers your profit on the whole job.

Markup by cost type: what it has to cover
Cost type	Why it needs a markup	Common mistake
Materials and parts	Buying time, supply-house runs, truck stock, waste, returns and the warranty callback if a part fails	Passing parts through at cost because the customer can see the price online
Major equipment (furnace, condenser, panel, water heater)	Freight, handling, install risk and the labor warranty you stand behind	Using the same percentage as small parts, which can price you out on big tickets
Subcontractors	Scheduling, supervision, insurance checks, paying the sub before the customer pays you, and fixing their callbacks	Adding nothing because "the sub does the work". You still carry the risk
Labor	Wages plus labor burden, drive time, non-billable hours and overhead per hour	Billing the tech's wage plus a few dollars, which ignores the hours nobody pays for
Rentals, permits and disposal	Pickup, paperwork, inspections and return trips	Forgetting them on the estimate, then eating the cost

Markup by trade

Every trade uses markup, but where the money comes from is different. Knowing your trade's cost mix tells you which markup matters most.

Where markup does the heavy lifting, by trade
Trade	Typical cost mix	Where markup matters most	Example (illustrative)
HVAC	Equipment-heavy on replacements; labor-heavy on service calls	Equipment markup on system swaps; parts markup on repairs	$450 repair ticket: $60 capacitor and contactor, the rest is labor and diagnostic
Plumbing	Mostly labor and small parts on service; fixtures on remodels	Small-parts markup and labor rate	$1,600 water heater swap with $700 of equipment
Electrical	Labor-heavy; panels and EV chargers are the big material items	Labor rate and panel or charger markup	$2,800 panel upgrade with $650 of panel and breakers
Roofing	Materials and crew labor split; dumpsters and permits add up	Whole-job markup over all direct costs	$14,000 replacement on $9,600 of direct cost
Landscaping	Plants, stone and mulch plus crew hours; equipment wear	Material markup on installs; hourly rate on maintenance	$4,500 patio with $1,800 of pavers and base
Cleaning	Almost all labor; supplies are small	Labor rate (there's little material to mark up)	$180 recurring clean with $8 of supplies

Example tickets are illustrative, not industry averages. Use your own job history.

Is markup the same as margin?

No. Markup is profit divided by cost; margin is profit divided by price. On the roofing job above, $4,400 of profit is a 45.8% markup but only a 31.4% gross margin. Mixing them up is the most expensive pricing mistake in the trades: a shop that wants a 50% margin and adds a 50% markup ends up with 33%. The full conversion table is in markup vs. margin.

How do you choose the right markup?

Work backward from the margin you need, not forward from what a competitor charges. Your markup has to cover overhead as a share of revenue plus your target profit. Once you know that target gross margin, convert it to a markup.

1
Add up a year of overhead.
Rent, office wages, trucks, insurance, phones, software, marketing and your own salary. See overhead for what belongs in it.
2
Divide overhead by expected revenue.
$300,000 of overhead on $1,000,000 of revenue is 30% of revenue that every job has to cover.
3
Add your target net profit.
If you want 10% net profit margin, you need a 40% gross margin across all jobs.
4
Convert margin to markup.
Markup = Margin ÷ (1 − Margin). 0.40 ÷ 0.60 = 66.7%. That's the blended markup on direct cost you need.

Common markup mistakes

Treating markup like margin. Adding 30% to cost does not give you a 30% margin. It gives you 23%.
Marking up unburdened labor. A tech paid $30 an hour costs you far more once payroll taxes, workers' comp, benefits and paid time off are in. Mark up the burdened cost.
One markup for everything. A flat 25% on a $5 fitting and a $5,000 condenser leaves money on the small parts and can lose bids on the big ones.
Forgetting soft costs. Permits, disposal, rentals, drive time and the second trip for a forgotten part all belong in cost before you mark it up.
Discounting the markup instead of the scope. When a customer pushes back on price, offer a smaller option (see good-better-best pricing) rather than cutting the markup on the same work.
Never checking actuals. If the job ran two days over, your real markup was lower than the quote. Job costing shows what you actually earned.

Frequently asked questions

How do you calculate a 20% markup?

Multiply your cost by 1.20. A part that costs $150 sells for $180 at a 20% markup, and the $30 difference is your gross profit. That $30 is a 16.7% margin on the $180 price, not 20%.

What is a good markup for a contractor?

A good markup is one that covers your overhead and leaves the profit you planned. Find your overhead as a share of revenue, add your target net profit to get a target gross margin, then convert it with Markup = Margin ÷ (1 − Margin). A shop needing a 40% margin needs about a 67% blended markup.

How much do HVAC companies mark up equipment?

It varies by company, market and job size, and there's no reliable published average for small shops. What's consistent is that equipment usually carries a lower percentage markup than small parts because the dollar amounts are large. Set yours from your overhead and target margin, and check it against what replacements actually cost you to install.

Should contractors mark up subcontractor costs?

Yes, in most cases. You schedule the sub, supervise the work, carry the insurance risk, often pay them before the customer pays you, and handle any callback. A markup on sub costs pays for that. Some commercial contracts cap or fix the allowed markup, so read the contract first.

Is it legal to mark up materials?

In general, yes. Selling materials for more than you paid is normal business pricing. Some contracts, such as cost-plus or government work, spell out what markup is allowed or require receipts, so follow the contract terms on those jobs.

What's the difference between markup and profit?

Markup dollars are gross profit: price minus direct job cost. Net profit is what's left after overhead such as rent, office staff, trucks and insurance is also paid. A job can carry a healthy markup and still lose money if overhead isn't covered.

Do you mark up labor or charge an hourly rate?

Both approaches end in the same place. Some shops add a markup percentage to burdened labor cost; others set a billable hourly rate that already includes overhead and profit. What matters is that the rate covers the tech's wage, labor burden, non-billable hours and overhead before profit.