Markup vs margin: the difference that quietly underbids jobs
If you set prices thinking in markup but talk in margin, you leave money on every job. Here's the difference, the formulas, and how to price so your margin is protected.
The one-sentence difference
Markup is profit as a percent of your cost. Margin is profit as a percent of the price you charge. Same dollars of profit — different denominator. That's the whole trap.
Why it costs you money
A "50% markup" sounds like half the job is profit. It isn't — it's only a 33% margin. Quick conversions:
- 25% markup = 20% margin
- 50% markup = 33% margin
- 100% markup = 50% margin
- 150% markup = 60% margin
If you need a 50% margin but price at a 50% markup, you're short on every ticket.
How to price by target margin
Add up your real cost, then divide by (1 − your target margin):
Price = Cost ÷ (1 − margin). Example: $420 of cost at a 45% target margin → $420 ÷ 0.55 = $764, for $344 gross profit.
Don't forget the overhead
"Cost" isn't just parts and labor — it includes the overhead the job should carry. See how to calculate overhead per hour, then run the numbers with the free margin calculator.
How BidRite handles it
BidRite shows markup and margin together, live, on every job — plus overhead recovery and EBITDA — so you never confuse the two. See job costing & EBITDA.