Markup vs Margin for Contractors
Markup measures profit against cost. Gross margin measures profit against selling price. That difference matters when you price a job.
The two formulas
Markup % = profit ÷ cost × 100.
Gross margin % = profit ÷ selling price × 100.
Worked example: $10,000 job cost
If a job costs $10,000 and you add a 30% markup, the selling price is $13,000. The $3,000 profit divided by the $13,000 selling price is about a 23.1% gross margin — not 30%.
If your goal is a true 30% gross margin, the selling-price formula is cost ÷ (1 − margin). For a $10,000 cost and 30% target margin, $10,000 ÷ 0.70 = about $14,286. That produces about $4,286 of gross profit before other business-level expenses not included in the job cost.
Why contractors get tripped up
Using markup when you think you are using margin can leave less gross profit in the job than you intended. The safest approach is to decide which measure your business uses, include the costs you intend to recover, and price from that definition consistently.
Run your own numbers
Enter your job cost and target gross margin into the free calculator.
Open Markup & Margin CalculatorThis is general estimating information, not accounting or financial advice. Define your own cost categories and verify your pricing method for your business.