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Markup vs. Margin Converter

Convert between markup and gross margin so you stop pricing below your intended profit.

Your cost
$

Everything the job or the part costs you: burdened labor, material, subs.

Set the price

Markup is profit measured against cost. Margin is profit measured against the selling price. Set one and the other falls out — they are never the same number.

Which one are you starting from?
%

What you add to cost. A 35% markup means you multiply cost by 1.35.

Target margin solver

Work the other direction: name the margin the business needs and see the markup that produces it.

%

Residential service work commonly targets 40% to 55% gross margin on labor.

Sell this at

$1,350

$350 of gross profit — a 35.0% markup on cost, which is a 25.9% margin on the price.
Cost
$1,000
Gross profit
$350
Markup on costMultiply cost by 1.350
35.0%
Margin on priceAlways the smaller of the two numbers
25.9%
Markup for a 45% marginSell at $1,818 instead
81.8%
Markup to margin conversion
Markup on costEquivalent marginMultiplierPrice on $1,000
10.0%9.1%1.100$1,100
15.0%13.0%1.150$1,150
20.0%16.7%1.200$1,200
25.0%20.0%1.250$1,250
30.0%23.1%1.300$1,300
35.0% — your price25.9%1.350$1,350
40.0%28.6%1.400$1,400
50.0%33.3%1.500$1,500
60.0%37.5%1.600$1,600
75.0%42.9%1.750$1,750
100.0%50.0%2.000$2,000
Target margin 45%45.0%1.818$1,818

A 20% markup gives you a 16.7% margin, not 20%

Markup divides profit by cost; margin divides the same profit by the bigger number, the selling price. They can never match. Your 35.0% markup is really a 25.9% margin — 9.1 points less than the markup figure suggests, or $123 of profit on this job alone. Multiply that gap across a year of work and it is frequently the entire net profit of the business.

This price falls 19.1 points short of your target

To hold 45% on a $1,000 cost you need a 81.8% markup and a price of $1,818 — that is $468 more than you are charging now. The shortcut is to divide cost by 0.55 rather than multiplying it by anything.

What this assumes

  • Markup is profit as a percentage of cost. Margin is profit as a percentage of selling price.
  • A 50% markup equals a 33.3% margin; a 50% margin requires a 100% markup.

Understanding the result

The most expensive confusion in the trades

Adding 20% to cost does not produce a 20% margin — it produces 16.7%. Over a year of jobs, that gap is often the entire net profit of the business. Price to the margin you need and let the markup fall where it falls.

You may also need

The next decision usually follows directly from this one.

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