Guides › Markup vs margin for contractors: the difference and the formulas · Updated 30 Oct 2026
Markup vs margin for contractors: the difference and the formulas
Markup and margin get mixed up all the time, and the mix-up costs money. Markup is added on top of cost. Margin is the share of the selling price that is profit.
An example
A job costs you 1,000. You add a 25% markup: price 1,250. Profit is 250. As a share of the price, that is 250 / 1,250 = 20% margin, not 25%.
The formulas
Price from cost and markup:
=Cost * (1 + Markup)
Price from cost and target margin:
=Cost / (1 - Margin)
Convert markup to margin and back:
=Markup / (1 + Markup) =Margin / (1 - Margin)
A small table to keep
| Markup | Margin |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 100% | 50% |
Which one to use
If you set a target margin for the business, price with the margin formula. It protects you from the "I thought I added 30%" surprise.
Rather start with a ready-made file?
The Trades Business Kit prices jobs from cost and margin and carries the result into the estimate and invoice. Your data stays in your own file.
Get the kit — $39 More info