Tool
Margin vs markup: what your quote really earns
The short answer. Margin is profit as a share of the price. Markup is profit as a share of the cost. Both come from the same two numbers, but a 50% markup is only a 33.3% margin. Enter your cost and your price below and the calculator shows both, so you can see what a quote earns before you send it.
The calculator
- Profit ($)
- n/a
- Margin (%)
- n/a
- Markup (%)
- n/a
Nothing you type is stored or sent. The sums run in your browser.
The formulas
- Profit = price - cost
- Margin % = (price - cost) / price x 100
- Markup % = (price - cost) / cost x 100
To go the other way:
- Price from a target margin = cost / (1 - margin)
- Price from a target markup = cost x (1 + markup)
- Markup from margin = margin / (1 - margin)
- Margin from markup = markup / (1 + markup)
Worked examples (fictional)
| Cost | Price | Profit | Margin | Markup |
|---|---|---|---|---|
| $1,295 | $1,850 | $555 | 30.0% | 42.9% |
| $800 | $1,200 | $400 | 33.3% | 50.0% |
| $2,400 | $3,000 | $600 | 20.0% | 25.0% |
| $500 | $1,000 | $500 | 50.0% | 100.0% |
All four rows are invented to show the arithmetic. The first row is the estimate from the job costing guide.
Margin and markup side by side
| If your markup is | Your margin is |
|---|---|
| 25% | 20.0% |
| 50% | 33.3% |
| 75% | 42.9% |
| 100% | 50.0% |
| If your margin is | You need a markup of |
|---|---|
| 20% | 25.0% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
The gap widens as the percentage rises. A firm that adds 40% to cost and calls it a 40% margin is earning about 28.6%.
When to use which
Use margin when you ask "how much of each dollar of revenue do we keep?" It is the number to compare to your overhead and your targets. Use markup when you price from a cost list, for example adding a percentage to materials. Say which one you mean in quotes, spreadsheets and team conversations. If two people mean different things by "30%", the job will not earn what either expects.
Margin on a quote is not the whole story. Overhead, rework, a second trip for a part, or a supplier delay can each lower the real margin on the job. The job costing guide shows how to work from estimate to actual.
Where this fits
This calculator is a plain tool for checking a number. It is separate from the Lode product, which is described in AI for service businesses. If you want to talk about how your own quoting and follow-up admin runs, talk to us about your workflow.
Questions
What is the difference between margin and markup?
Margin divides profit by the price. Markup divides profit by the cost. For the same profit, markup is always the larger number.
Can margin be higher than 100%?
No. Margin cannot exceed 100% because profit cannot exceed the price. Markup can be any size.
What does a negative result mean?
The price is below the cost, so the job loses money.
Does the calculator save or send my numbers?
No. It runs in your browser and nothing is stored or transmitted.
Should I use my full cost, or only materials?
Use full job cost if you want to know what the job earns: labor, materials, subs, equipment and an overhead share.