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Bid Price Calculator: Markup vs Margin for Contractors

By Oussama Chicha, EditorUpdated Checked against primary sources · not yet reviewed by a licensed professionalFormula shown below · see the math
Quick answer

To hit a target profit margin, divide total cost by one minus the margin: Bid = Total cost ÷ (1 − margin). A job costing $40,880 with a 15% margin should be bid at $48,094, a 17.6% markup on total cost, not 15%.

Your job

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Office, trucks, insurance and software, spread across your jobs.
Recommended bid · liveSheet 01
Recommended bid price
$48,094
Direct cost
$36,500
Overhead
$4,380
Total cost
$40,880
Profit
$7,214
Markup on total cost
17.6%
Markup on direct cost
31.8%

If you added a 15.0% markup instead, you'd bid $47,012 and keep only a 13.0% margin: $1,082 less.

The math for your numbers
Direct cost = $36,500.00
Overhead    = $36,500.00 × 12% = $4,380.00
Total cost  = $36,500.00 + $4,380.00 = $40,880.00
Bid price   = $40,880.00 ÷ (1 − 15%) = $48,094.12
Profit      = $48,094.12 − $40,880.00 = $7,214.12

Sources and defaults

No external data: this calculator is pure arithmetic, with the formulas shown above.

Markup vs margin: why 15% isn't 15%

Margin is profit as a share of the price. Markup is profit as a share of the cost. Because the price is always larger than the cost, the same dollar profit is a smaller margin than it is a markup.

That is where bids leak money. Adding a 15% markup to a $40,880 job gives $47,012, which is a margin of only 13.0%. Compared with a true 15% margin, that job leaves $1,082 on the table.

Conversion table

Target marginMarkup needed
5%5.3%
10%11.1%
15%17.6%
20%25.0%
25%33.3%
30%42.9%
35%53.8%

FIG. 02 · MARGIN TO MARKUP · MARKUP = MARGIN ÷ (1 − MARGIN)

The formulas

How to use this calculator

  1. Enter your direct costs for the job. Use burdened labor (wages plus payroll taxes, insurance and benefits), not just wages.
  2. Add your overhead rate as a percent of direct cost.
  3. Set the profit margin you want to keep after overhead.
  4. Copy the page link to save or share the result. Your numbers stay in the link, not on our servers.

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