Markup vs. Margin
Markup is the percentage you add to your cost to get the selling price. Margin is the share of the selling price that is profit. The two give different percentages, so mixing them up underprices a job.
What it means
Say a job costs you $100 in materials and labor. A 50% markup prices it at $150, which is $100 plus half of $100. The $50 profit is only a 33% margin of the $150 selling price. It is not 50%. Margin is measured against the price you charge. Markup is measured against your cost.
The mix-up costs real money. Someone wants a 40% margin but types "40% markup" into a spreadsheet. A 40% markup gives only a 28.5% margin. That is a thinner cushion than they thought they priced in. Decide which one you are targeting. Use that word on every quote.
A job costs you $200. Price it with a 50% markup and you charge $300. That is only a 33% margin. To hit a 50% margin on the same job, you need to charge $400.
Typing your target margin percentage into a markup formula, or the reverse. You then miss that the selling price came out lower than you meant.
See also
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