Markup vs margin: the difference
Both describe the gap between what a job costs you and what you charge. They just measure it against different numbers.
- Markup is profit divided by your cost. Markup = profit / cost.
- Margin is profit divided by your sell price. Margin = profit / price.
Because the sell price is always bigger than the cost, the margin percent is always smaller than the markup percent for the same job. Quote off markup while thinking in margin and you undercharge every time.
Markup to margin conversion
| Markup | Equals margin of |
|---|
To hit a target margin, the markup you need is: markup = margin / (100 − margin) × 100. A 30% margin needs a ~42.9% markup.