Markup vs Margin for Contractors: Formulas, Conversion Chart, and Real Job Examples

If you add 30% to your costs and think you're making 30%, you're not. You're making 23.1%. That gap between markup and margin is one of the most common reasons contractors hit their revenue goals and still miss their profit goals.

This guide breaks down markup vs margin in plain terms: the formulas, a conversion chart you can keep next to your estimating sheet, a worked example on a real multi-day job, and a simple way to set a target margin that actually covers your overhead.

Quick answer:
‍Markup is profit as a percentage of your cost.
‍Margin is profit as a percentage of your selling price.
The same dollar profit always produces a higher markup than margin - a 50% markup is only a 33.3% margin.

‍

What is markup?

Markup is how much you add on top of your cost to get your price. It's the number most contractors think in, because estimating starts with costs and works up.

Markup % = (Price − Cost) ÷ Cost × 100

Example: a job costs you $10,000 and you price it at $13,000.
Your profit is $3,000, so your markup is $3,000 ÷ $10,000 = 30%.

‍

What is margin?

Margin is how much of the selling price you keep after covering the cost of the job. It's the number your accountant, your bank, and your P&L use.

Margin % = (Price − Cost) ÷ Price × 100

Same job: $3,000 profit on a $13,000 price is a margin of $3,000 ÷ $13,000 = 23.1%.

‍

Markup vs margin: the difference side by side

• Based on: markup uses your cost; margin uses your selling price.
• Formula: markup = (Price − Cost) ÷ Cost; margin = (Price − Cost) ÷ Price.
• Same $10,000 job priced at $13,000: a 30% markup, but only a 23.1% margin.
• Where you'll see it: markup in estimates, price books, and supplier quotes; margin on your P&L, job profitability reports, and in lender conversations.
• Can it go over 100%? Markup can; margin can't.

The key point: markup and margin describe the same dollars from two different starting points. Neither is wrong. The mistake is setting a goal in one and pricing in the other.

‍

Why mixing them up costs contractors real money

Say you want a 25% margin and you add a 25% markup to every estimate. On $400,000 of annual job costs:

• Priced with a 25% markup: $500,000 in revenue and $100,000 in gross profit - an actual margin of 20.0%.
• Priced for a true 25% margin: $533,333 in revenue and $133,333 in gross profit - an actual margin of 25.0%.

That's $33,333 in profit left on the table - not because you under-bid any one job, but because the math was off on every one of them.
‍

Markup to margin conversion chart

Keep this chart next to your estimating sheet. Find the margin you want, then use the markup next to it.

• 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
• 33.3% markup = 25.0% margin
• 40% markup = 28.6% margin
• 42.9% markup = 30.0% margin
• 50% markup = 33.3% margin
• 60% markup = 37.5% margin
• 66.7% markup = 40.0% margin
• 75% markup = 42.9% margin
• 100% markup = 50.0% margin

‍

Convert either way in one step:

• Margin = Markup ÷ (1 + Markup) - a 40% markup is 0.40 ÷ 1.40 = 28.6% margin
• Markup = Margin ÷ (1 − Margin) - a 30% margin needs 0.30 ÷ 0.70 = 42.9% markup
• Price for a target margin = Cost ÷ (1 − Margin) - the fastest way to price a job

‍

Worked example: pricing a 5-day deck build

Here's how the math plays out on a real multi-day project. Direct costs for a 5-day composite deck build:

• Materials (composite decking, framing, hardware): $8,400
• Labor (3-person crew × 5 days × 8 hrs × $38/hr burdened): $4,560
• Electrical sub (deck lighting): $900
• Permit and disposal: $540
• Total direct cost: $14,400

‍

Your target is a 30% gross margin. Here's the difference between pricing it right and pricing it with a "30% markup":

• Priced with a 30% markup: $18,720 price and $4,320 gross profit - a 23.1% margin.
• Priced for a true 30% margin: $20,575 price and $6,175 gross profit - a 30.0% margin.

‍

Same deck, same crew, $1,855 difference on one job. Across 40 jobs a year, that's more than $74,000.

‍

Don't let change orders drag the margin down

On day 3 the homeowner adds a set of stairs to the yard: $1,200 in extra cost. If you bill it at cost plus 10% ($1,320), the whole job's margin drops from 30.0% to 28.8%.
Price the change order at your target margin instead - $1,200 ÷ 0.70 = $1,714 - and the job stays at 30%.

Rule of thumb: every change order gets priced at the same target margin as the original job, and gets signed before the work starts.

Our free Change Order Template makes that a two-minute step.

‍

Where margin quietly leaks on real jobs

Even with the right math on the estimate, margin disappears between the estimate and the final invoice. The usual suspects:

• Unburdened labor rates. Pricing labor at the wage alone, without payroll taxes, workers' comp, insurance, and benefits, understates your real cost on every hour.
• Multi-day overruns. Day 4 becomes day 6, and the extra crew days never make it onto the invoice.
• Unbilled materials. Extra trips to the supplier, returns that never got credited, and small items nobody logged.
• Handshake change orders. Scope added on site with no price and no signature.
• Discounts off the top. A 10% discount on a 30% margin job doesn't cost you 10% of your profit - it costs you a third of it.
• Callbacks and warranty work. Return visits that eat labor with no revenue attached.

‍

How to set your target margin

Your target margin shouldn't be a number you heard at a trade show. It should come from your own overhead and the profit you want to keep.

1. Add up your annual overhead - office staff, rent, trucks, insurance, software, marketing, owner salary.
2. Divide overhead by expected revenue to get your overhead percentage. Example: $180,000 ÷ $1,000,000 = 18%.
3. Add your target net profit. Example: 10%.
4. That's your required gross margin: 18% + 10% = 28%.
5. Convert it to a markup for your estimates: 0.28 ÷ 0.72 = 38.9% markup.

If the market won't pay that price in your area, the answer is to cut overhead or change the jobs you take on - not to quietly accept a lower margin.

‍

Track margin after the job, not just before it

The estimate tells you the margin you planned. Job costing tells you the margin you made. The gap between the two is where growing contractors find their biggest profit wins.

In MotionOps, timesheets, material expenses, and change orders attach to the job as the crew works, so estimated vs actual margin is visible while the job is still running - not three weeks after the final invoice. Before a job closes, MotionOps flags uninvoiced timesheets or materials, open change orders, and uncollected invoices, so nothing slips through at the finish line.

‍

Free download: Contractor Estimate Template - build estimates with cost lines, markup, and a clear customer-facing total.
Pair it with the Change Order Template to protect your margin once the job starts.

‍

FAQ

Is a 30% markup the same as a 30% margin?

No. A 30% markup gives you a 23.1% margin. To get a 30% margin, you need a 42.9% markup.

What markup do I need for a 25% margin?

A 33.3% markup. Use Markup = Margin ÷ (1 − Margin): 0.25 ÷ 0.75 = 0.333.

What is builder's margin?

"Builder's margin" usually means the builder's gross profit as a share of the final sale price. It's the same margin formula - (Price − Cost) ÷ Price - applied to a build.

Should I estimate with markup or margin?

Estimate with whichever your sheet uses, but set your targets and review finished jobs in margin. Margin is what shows up on your P&L, so it's the number that tells you whether the business is healthy.

How do change orders affect job margin?

Every change order adds cost and revenue to the job. If you price change orders below your target margin, the job's overall margin drops, even if the original estimate was right.

‍

Know your margin on every job

Markup gets you to a price. Margin tells you whether the job was worth doing.
MotionOps connects estimates, timesheets, materials, change orders, and invoices on one job record, so you can see job profitability as the work happens.

Book a MotionOps demo and see job costing on a real multi-day project - or compare plans.

‍