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Construction Markup vs Margin Calculator
Markup and margin are not the same number, and confusing them is one of the most common ways contractors underbid. Enter your job cost and either a markup or the margin you want to keep.
Bid price
$12,500
Gross profit
$2,500
Markup on cost
25%
Gross margin
20%
How it is calculated
- Markup is profit as a percentage of cost: price = cost × (1 + markup).
- Margin is profit as a percentage of the selling price: price = cost ÷ (1 − margin).
- Converting: margin = markup ÷ (1 + markup); markup = margin ÷ (1 − margin).
- Example: a 25% markup only yields a 20% margin. To keep a 25% margin you need a 33.3% markup.
| Markup on cost | Resulting gross margin |
|---|---|
| 10% | 9.1% |
| 15% | 13% |
| 20% | 16.7% |
| 25% | 20% |
| 30% | 23.1% |
| 35% | 25.9% |
| 50% | 33.3% |
| 100% | 50% |
FAQ
What is the difference between markup and margin in construction?
Markup is calculated on cost; margin is calculated on the selling price. The same dollar profit is always a smaller percentage as margin than as markup.
What markup gives a 20% margin?
A 25% markup. Markup = 0.20 ÷ (1 − 0.20) = 0.25.
What margin does a 50% markup give?
A 33.3% margin. Margin = 0.50 ÷ 1.50.
Should overhead be in the cost before markup?
Decide it consistently. If overhead is not included in the job cost, the markup must cover overhead and profit; if it is included, the markup is profit only. Mixing both approaches is a common source of underbidding.