The formulas
- Margin = Markup ÷ (1 + Markup)
- Markup = Margin ÷ (1 - Margin)
- Price = Cost × (1 + Markup)
Markup is measured against your cost; margin is measured against your price. Because price is always bigger than cost, the same dollar profit is always a smaller percentage as a margin than as a markup.
Markup to margin conversion chart
- 10% markup = 9.1% margin
- 15% markup = 13.0% margin
- 20% markup = 16.7% margin
- 25% markup = 20.0% margin
- 30% markup = 23.1% margin
- 35% markup = 25.9% margin
- 40% markup = 28.6% margin
- 50% markup = 33.3% margin
- 75% markup = 42.9% margin
- 100% markup = 50.0% margin
Why it matters when you price jobs
If you need a 20% margin to cover overhead and profit, applying a 20% markup falls short: a $10,000 job marked up 20% sells for $12,000, which is only a 16.7% margin. To hit 20% margin you need a 25% markup - $12,500. On a year of $1M in jobs, that gap is more than $33,000.
Decide the margin you need first, convert it to a markup with the calculator above, and apply that markup to your costs.
Frequently asked questions
What markup do I need for a 30% margin?
About 42.9%. Markup = 0.30 ÷ (1 - 0.30) = 0.4286. A job that costs $10,000 would need to sell for about $14,286.
Is a 50% markup the same as a 50% margin?
No. A 50% markup is a 33.3% margin. A 50% margin requires a 100% markup - doubling your cost.
Can margin ever be higher than markup?
Not when there is a profit. For any positive profit, the margin percentage is always lower than the markup percentage because it is divided by a larger number (the price instead of the cost).
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