Markup vs. Margin
Markup is the percentage you add on top of your cost to get your selling price. Margin is the percentage of the final selling price that’s actually profit. They use the same two numbers but never land on the same percentage — mixing them up quietly underprices a job.
What it means
Say a job costs you $100 in materials and labor. A 50% markup prices it at $150 ($100 plus half of $100). But that $50 of profit is only a 33% margin of the $150 selling price, not 50% — margin is measured against the price you’re charging, markup is measured against your cost.
The mix-up costs real money when someone means “I want a 40% margin” but types “40% markup” into a spreadsheet — a 40% markup only gets you a 28.5% margin, a meaningfully thinner cushion than they thought they’d priced in. Decide which one you’re actually targeting and use that word consistently on every quote.
A job costs you $200. Price it with a 50% markup and you charge $300 — but that’s only a 33% margin. To actually hit a 50% margin on the same job, you’d need to charge $400.
Typing your target margin percentage into a markup formula (or the reverse) and not noticing the selling price came out lower than you meant it to.
See also
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