Why the $1 mistake happens
Add $1 of markup to $1 of cost and the price doubles to $2. That looks like a 100% increase, but it is only a 50% margin, because margin is measured against the $2 price, not the $1 cost.
Markup and margin answer two different questions. Markup is profit as a share of what the job cost. Margin is profit as a share of what it sold for. The price is always the bigger number, so the same dollar of profit is always a smaller percentage of it. Treat the two as interchangeable and a bid quietly comes in short: a 25% markup on a $40,000 job prices it at $50,000, which is only a 20% margin, not 25%.
Conversion table
| Target margin | Markup 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 two formulas
- Markup = profit ÷ cost
- Margin = profit ÷ price
- margin = markup ÷ (1 + markup). A 25% markup is a 20% margin.
- markup = margin ÷ (1 − margin). A 20% margin needs a 25% markup.
The two only match at 0%. Above that, markup is always the larger number for the same job, because it is measured against the smaller base. Our markup and margin table has both formulas worked out in Excel, ready to print.
How to use this calculator
- Pick the number you already have: markup, if you mark costs up to set a price, or margin, if you work backward from a target profit share.
- Type that percent into the field. The other one converts instantly.
- Add the job's cost to see the actual price and profit dollars, not just the percentages.
- Copy the page link to save or share the result. Your numbers stay in the link, not on our servers.
FAQ
Is a 25% markup the same as a 25% margin?
No. A 25% markup on a $100 cost prices the job at $125, which works out to a 20% margin. Markup is profit divided by cost; margin is profit divided by price, and price is always the bigger number.
How do I convert margin to markup?
Divide the margin by one minus the margin: markup = margin ÷ (1 − margin). A 20% margin needs a 25% markup; a 33.3% margin needs a 50% markup.
Why is margin always smaller than markup for the same job?
Margin is profit divided by the price, and markup is profit divided by the cost. The price is always larger than the cost, so the identical dollar of profit is a smaller share of it. Margin is always less than markup above 0%.
Related tools
- Bid price calculator: turn a job cost, overhead and a target margin into a full bid, with the markup it actually takes.
- Change order calculator: price a scope change using the same markup and margin math.