Markup vs. Margin: What's the Difference?

By BRIX Editorial Team · Updated October 12, 2026

Markup and margin both measure profit on a sale, but against different bases. Markup is profit divided by cost; margin is profit divided by price. A job that costs $1,000 and sells for $1,500 has a 50% markup but a 33.3% margin. For the same job, margin is always smaller than markup.

Key takeaways

Markup = Profit ÷ Cost. Margin = Profit ÷ Price. Same profit dollars, different denominators.
To hit a target margin, divide cost by (1 − margin). Don't multiply by (1 + margin).
Margin → markup: Markup = Margin ÷ (1 − Margin). Markup → margin: Margin = Markup ÷ (1 + Markup).
A 40% markup is only a 28.6% margin. A 100% markup is a 50% margin.
Price with markup if you like, but set your targets and read your P&L in margin, because that's how revenue-based numbers like overhead are measured.

What's the difference between markup and margin?

The difference is what you divide by. Markup compares profit with what the job cost you. Gross margin compares the same profit with what the customer paid. Because price is always bigger than cost on a profitable job, the margin percentage always comes out smaller than the markup percentage.

Markup and margin side by side
	Markup	Margin
Formula	(Price − Cost) ÷ Cost	(Price − Cost) ÷ Price
Measured against	Your cost	The selling price (revenue)
Can it exceed 100%?	Yes (a $50 part sold for $150 is a 200% markup)	No, it's always under 100%
Best used for	Building a price from cost quickly	Setting targets, reading your P&L, comparing jobs
$1,000 cost, $1,500 price	50%	33.3%

Conversion formulas

Markup = Margin ÷ (1 − Margin)   |   Margin = Markup ÷ (1 + Markup)   |   Price = Cost ÷ (1 − Margin)

Margin: target gross margin as a decimal (40% = 0.40)
Markup: markup on cost as a decimal (66.7% = 0.667)
Cost: direct job cost: materials, burdened labor, subs, permits and disposal

Markup to margin conversion table

Use this table to translate between the two. Find the margin you need in the first column and read across for the markup to apply to cost.

Margin, markup and price on $1,000 of cost
Target margin	Markup needed on cost	Price on $1,000 of cost	Gross profit
10%	11.1%	$1,111	$111
15%	17.6%	$1,176	$176
20%	25.0%	$1,250	$250
25%	33.3%	$1,333	$333
30%	42.9%	$1,429	$429
35%	53.8%	$1,538	$538
40%	66.7%	$1,667	$667
45%	81.8%	$1,818	$818
50%	100.0%	$2,000	$1,000
55%	122.2%	$2,222	$1,222
60%	150.0%	$2,500	$1,500

Calculated with Markup = Margin ÷ (1 − Margin), rounded to one decimal place. Prices rounded to the dollar.

Common markups and the margin they actually produce
Markup on cost	Real margin
10%	9.1%
20%	16.7%
25%	20.0%
30%	23.1%
40%	28.6%
50%	33.3%
75%	42.9%
100%	50.0%
150%	60.0%
200%	66.7%

To run your own numbers, the markup and margin calculator converts in both directions and shows the price for any cost.

Why does mixing them up cost so much?

Mixing them up costs money because your overhead and profit targets are percentages of revenue, so they're margins. If you apply that same percentage as a markup on cost, every job comes in under target, and the gap grows with volume. The bigger your target, the bigger the shortfall.

Markup vs. margin by trade

Each trade tends to talk in one or the other, which is where confusion creeps in when owners compare notes or read pricing advice from a different trade.

How each trade usually prices, and where the trap is
Trade	How prices are often built	Where the confusion shows up
HVAC	Flat-rate pricebooks built to a target margin; equipment marked up on cost	A supplier's "suggested markup" on equipment compared with the shop's margin target
Plumbing	Flat-rate service tasks plus parts markup tables	Parts markups over 100% look huge but are normal margins of 50% or so
Electrical	Hourly or flat rate on service; bid jobs priced as cost plus markup	Bid estimators quoting "15% profit" without saying if it's markup or margin
Roofing	Cost per square plus a markup, or cost ÷ (1 − margin)	Sales reps paid on margin while estimates are built on markup
Remodeling and restoration	Cost plus overhead and profit, often "10 and 10" on insurance work	10% overhead plus 10% profit added to cost is a 20% markup, which is only a 16.7% margin
Landscaping and cleaning	Hourly or per-visit rates built from labor cost	Labor-heavy work needs high markups on labor to reach a modest margin

Should contractors use markup or margin?

Use both, for different jobs. Set your targets in margin, because overhead, profit and your profit and loss statement are all measured against revenue. Then price with whichever method is faster for you: divide cost by (1 − target margin), or multiply cost by the matching markup from the table above. Both give the same price.

Find overhead as a percentage of revenue from last year's books.
Add the net profit margin you want. That's your target gross margin.
Convert it to a markup once and put it in your estimating tool or price list.
After each job, check the real margin with job costing.

Common mistakes

Multiplying by (1 + margin). $1,000 × 1.40 gives a 28.6% margin, not 40%. Divide by 0.60 instead.
Working backward with the wrong rate. If a $1,500 job carries a 33.3% margin, cost is $1,500 × (1 − 0.333) = $1,000. Dividing by 1.333 gives $1,125 and overstates your cost.
Paying commission on markup when the plan says margin. Write the formula into the pay plan with an example.
Comparing your markup to someone else's margin. A competitor's "45%" might be either. Ask which.
Discounting off the price as if it came off markup. A 10% discount on a job priced at a 40% margin cuts the margin to about 33%, and takes a quarter of the gross profit with it.

Frequently asked questions

Is a 50% markup the same as a 50% margin?

No. A 50% markup on $1,000 of cost gives a $1,500 price and $500 of profit, which is a 33.3% margin. To reach a 50% margin you need a 100% markup: $1,000 of cost sold for $2,000.

How do I convert markup to margin?

Divide the markup by one plus the markup, using decimals. A 40% markup is 0.40 ÷ 1.40 = 0.286, or a 28.6% margin. Going the other way, Markup = Margin ÷ (1 − Margin).

How do I price a job for a 30% margin?

Divide your direct cost by 0.70. A job with $2,100 of cost needs a $3,000 price to earn a 30% margin, which is $900 of gross profit. That's the same as a 42.9% markup on cost.

Why is margin always lower than markup?

Both use the same profit dollars, but margin divides by the price and markup divides by the cost. On any profitable job the price is larger than the cost, so the margin percentage comes out smaller.

Which is better for contractors, markup or margin?

Margin is better for setting targets and reading your financial statements, because overhead and profit are percentages of revenue. Markup is handy for building a price from cost. Use whichever is faster for pricing, as long as the markup is converted from the margin you need.

What does 10 and 10 mean in contracting?

It usually means adding 10% for overhead and 10% for profit on top of job cost, common on insurance restoration and remodeling estimates. Added to cost, that's a 20% markup, which works out to a 16.7% margin on the final price, before any tax.