# Markup vs. Margin: What's the Difference?

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](https://www.brix.so/learn/markup) compares profit with what the job cost you. [Gross margin](https://www.brix.so/learn/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)
```

Where:
- 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

> **Worked example: pricing a $14,000 roof to a target margin**
>
> Illustrative numbers. A roofer's direct cost on a replacement is $9,600 and the target gross margin is 35%.
>
> Price = $9,600 ÷ (1 − 0.35) = $9,600 ÷ 0.65 = **$14,769**. Gross profit = $5,169, which is 35% of the price.
>
> The markup that gets there: 0.35 ÷ 0.65 = **53.8%**. Check: $9,600 × 1.5385 ≈ $14,769.
>
> If the roofer had added a 35% markup instead, the price would be $12,960 and the margin only 25.9%: $1,809 less gross profit on one roof.

## 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](https://www.brix.so/tools/markup-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.

> **The 40% mistake**
>
> Illustrative numbers. A plumbing company knows it needs a 40% gross margin: 30% to cover overhead and 10% for profit. The owner adds 40% to cost on every job.
>
> Over a year, direct job costs are $500,000. With a 40% markup, revenue is $700,000 and gross profit is $200,000, a **28.6% margin**.
>
> To actually earn 40%, revenue needed to be $500,000 ÷ 0.60 = $833,333, with $333,333 of gross profit.
>
> The difference is **$133,333** of gross profit. With overhead at about $250,000 at that volume, the company didn't make 10% profit; it lost about $50,000.

## 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.

1. Find [overhead](https://www.brix.so/learn/overhead) as a percentage of revenue from last year's books.
2. Add the [net profit margin](https://www.brix.so/learn/net-profit-margin) you want. That's your target gross margin.
3. Convert it to a markup once and put it in your estimating tool or price list.
4. After each job, check the real margin with [job costing](https://www.brix.so/learn/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.

BRIX builds quotes on site from your price list and follows up every open estimate, then syncs the invoice to QuickBooks so the margin you quoted and the margin you earned sit side by side.

- [Quotes and estimates](https://www.brix.so/features/quotes-estimates): Builds accurate quotes on site and follows up on every open estimate.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

## 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.

## Related

- [What Is Markup?](https://www.brix.so/learn/markup)
- [What Is Gross Margin?](https://www.brix.so/learn/gross-margin)
- [What Is Net Profit Margin?](https://www.brix.so/learn/net-profit-margin)
- [What Is Overhead, and How Do Contractors Calculate It?](https://www.brix.so/learn/overhead)
- [What Is Cost Plus Pricing?](https://www.brix.so/learn/cost-plus-pricing)
- [What Is Flat Rate Pricing?](https://www.brix.so/learn/flat-rate-pricing)
- [Markup and Margin Calculator](https://www.brix.so/tools/markup-margin-calculator)
- [Job Pricing Calculator for Contractors](https://www.brix.so/tools/job-pricing-calculator)
- [How to Price Contracting Jobs for Profit: The Complete Guide](https://www.brix.so/guides/how-to-price-jobs)
- [Maintenance Agreement Pricing Calculator](https://www.brix.so/tools/maintenance-agreement-calculator)

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Written by BRIX Editorial Team. Last updated 2026-10-12.
Canonical: https://www.brix.so/learn/markup-vs-margin