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Markup vs margin, worked out.

A 50% markup is not a 50% margin. Put in what the job costs you and what you charge, and see both, plus the price that hits the margin you're after.

$
Materials, labor and anything else the job costs you.
$
%
Gross profit$600
Markup (profit ÷ cost)50%
Margin (profit ÷ price)33.3%
Price for your target margin$1,846

Redline keeps the price, the invoice and what you spent on the job together, so profit per job is on your Money tab without a spreadsheet.

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How the math works

Profit is the price minus your cost. Markup is that profit divided by your cost. Margin is the same profit divided by the price. Same dollars, two different bases, so markup is always the bigger percentage.

To price for a target margin, divide your cost by one minus the margin. A $1,200 job at a 35% margin is $1,200 ÷ 0.65, which is $1,846.15. Adding 35% to the cost instead gives $1,620, and that's only a 25.9% margin.

To switch between the two: margin is markup ÷ (1 + markup), and markup is margin ÷ (1 minus margin). A 50% markup is a 33.3% margin. A 40% margin is a 66.7% markup.

The same job, two ways to say it

On a $1,000 cost:

PriceProfitMarkupMargin
$1,250$25025%20%
$1,500$50050%33.3%
$2,000$1,000100%50%

The table is plain arithmetic, not industry figures. Your own costs set your numbers.

Worked example: pricing for a target margin

A job that costs you $1,200 in materials, labor and job costs, priced for different margins:

Target marginPriceProfitSame as a markup of
20%$1,500.00$300.0025%
30%$1,714.29$514.2942.9%
35%$1,846.15$646.1553.8%
40%$2,000.00$800.0066.7%
50%$2,400.00$1,200.00100%

Example figures to show the math. They aren't benchmarks for any trade.

What to watch for

  • Mixing the two up underprices the job. If you want a 35% margin and add 35% to cost, you land at 25.9%.
  • Cost has to be all of it: materials, labor at what it really costs you (see the burdened labor rate calculator), subs, dump fees and permits. Leave one out and both percentages look better than they are.
  • Gross margin isn't take-home. Overhead comes out of it first. The overhead rate calculator shows how much of every dollar the truck, insurance and phone eat.
  • Discounts come straight out of margin. Take 10% off that $1,846.15 price and the margin drops from 35% to 27.8%.
  • Margin can never reach 100%, but markup has no ceiling. If someone quotes you a 150% margin, they mean markup.
  • Card processing fees come out of the price your customer pays, so a thin margin gets thinner when they pay by card.

Questions contractors ask

Which number should I price from?

Pick one and use it every time. Many owners think in margin because it reads straight off the price: a 30% margin means 30 cents of every dollar is gross profit. If you think in markup, just remember it's always the bigger number for the same job.

How do I turn a markup into a margin?

Divide the markup by one plus the markup. A 25% markup is 0.25 ÷ 1.25, a 20% margin. Going the other way, divide the margin by one minus the margin: a 20% margin is 0.20 ÷ 0.80, a 25% markup.

Should materials and labor carry the same markup?

They don't have to. Many contractors put one markup on parts and price labor from an hourly rate. The materials markup calculator works from list price and your supplier discount, and the hourly rate calculator builds the labor side.

Does markup cover my overhead?

Only if you price it in. Gross profit has to pay for the truck, insurance and your own time before anything is left over. The job profit calculator lets you set aside an overhead share so you see what a job really nets, and the break-even calculator shows how many jobs a month cover your fixed costs.

How does Redline help with this?

Tell the chat your markup or target margin once ("I mark materials up 25%") and memory keeps it for the next quote. On Solo and up, Redline keeps each job's invoice and the receipts filed against it together, and Money's Reports tab shows profit per job after materials. See quotes and estimates and expenses and reports.

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