Markup is the amount you add to your cost, expressed as a percentage of that cost. Margin is the profit you keep, expressed as a percentage of the price you charged. Same two numbers, different denominator. A 50% markup is a 33% margin — and a business that thinks those are the same figure is under-charging on every invoice.
What are the two formulas?
Take a job that costs you $1,000 in materials and labour and sells for $1,500.
Markup = (price − cost) ÷ cost = $500 ÷ $1,000 = 50%.
Margin = (price − cost) ÷ price = $500 ÷ $1,500 = 33.3%.
Nothing about the job changed. Only the denominator did. Markup asks "how much did I add on top of what it cost me?" Margin asks "of the money the customer handed me, how much did I keep?" Your suppliers quote you in markup. Your accountant, your lender and your own bank balance work in margin.
How does the mix-up actually cost money?
The failure is specific and common: an owner decides the business needs a 30% margin, and prices jobs at cost plus 30%. That is a 30% markup, which is a 23% margin — seven points short, on every job, all year.
On $600,000 of annual cost that gap is roughly $54,000 of profit that was priced away before a single customer negotiated. It never shows up as a bad month. It shows up as a busy year that somehow produced no cash, which is the version that is hardest to diagnose.
What is the conversion table?
Pin this where you build quotes. To hit a target margin, apply the markup in the right-hand column.
| If your markup is… | Your margin is… | To hit that margin, mark up… |
|---|---|---|
| 10% | 9.1% | 11.1% |
| 20% | 16.7% | 25% |
| 25% | 20% | 33.3% |
| 30% | 23.1% | 42.9% |
| 40% | 28.6% | 66.7% |
| 50% | 33.3% | 100% |
| 100% | 50% | — |
The formula behind the third column: markup = margin ÷ (1 − margin). A 50% margin genuinely requires doubling your cost, which is the row that surprises people most.
Which number should you run the business on?
Quote in markup, because that is how a job gets built — you start from what it costs you. Manage in margin, because that is what pays overhead, wages and you.
Two disciplines make it stick. First, load your true cost before applying markup: not just materials and direct labour but vehicle, insurance, and the unbillable hours the job really consumed. A correct markup on an understated cost is still a loss. Second, check realised margin against quoted margin monthly — the gap between them is where change orders, callbacks and rework live.
Pricing is only half of it. The other half is how many of the leads you already paid for ever get a quote at all — the free diagnostic measures that in about a minute.
Questions owners actually ask
What is the difference between markup and margin?
Markup is profit as a percentage of your cost. Margin is profit as a percentage of your selling price. Same dollars, different denominator — so the two percentages are never equal.
Is a 50% markup the same as a 50% margin?
No. A 50% markup is a 33.3% margin. To reach a 50% margin you have to mark up 100% — double your cost.
How do I convert a target margin into a markup?
Markup = margin ÷ (1 − margin). For a 30% margin: 0.30 ÷ 0.70 = 0.429, so mark up 42.9%.
Which one should I quote in?
Quote in markup, because you build a price up from cost. Manage the business in margin, because margin is what actually covers overhead and pays you.
Read next: what marketplace leads really cost · the leads you already paid for.