Free Tool
Markup vs Margin Calculator
Enter your job cost and any one of sell price, markup percent, or margin percent — get the rest instantly. Built for contractors and the contractor license business and law exam.
Sell price
$125.00
Profit
$25.00
Markup
25.00%
profit ÷ cost
Margin
20.00%
profit ÷ price
Markup vs Margin: The Pricing Math That Protects Your Profit
Markup and margin both describe the profit built into a price, but they measure it against different bases, and mixing them up is one of the most expensive mistakes a contractor can make. Markup is profit as a percentage of cost: markup percent = (price − cost) ÷ cost × 100. Margin is profit as a percentage of the selling price: margin percent = (price − cost) ÷ price × 100. On a $100 job sold for $125, the same $25 of profit is a 25 percent markup but a 20 percent margin.
To set prices, you run the formulas in reverse. When you price by markup, the sell price is cost × (1 + markup ÷ 100), so a 50 percent markup on a $100 job yields $150. When you price by margin, the sell price is cost ÷ (1 − margin ÷ 100), so a 20 percent margin on a $100 job yields $125. Because margin divides by the larger number, hitting a given margin always requires a higher price than the same-numbered markup would — a 50 percent markup is only a 33.33 percent margin.
The contractor license business and law exam tests this relationship directly, and job-site estimating relies on it every day. Deciding whether to build a fixed percentage on top of your costs (markup) or to guarantee a share of every dollar collected as profit (margin) changes your bid, your break-even, and your take-home. This calculator lets you enter cost plus any one driver and see all four figures — price, profit, markup, and margin — so the conversion becomes second nature.
Frequently Asked Questions
What is the difference between markup and margin?
Markup is profit expressed as a percentage of your cost, while margin is profit as a percentage of your selling price. On a $100 job sold for $125, the $25 profit is a 25 percent markup (25 ÷ 100) but only a 20 percent margin (25 ÷ 125). Because the denominators differ, the same job always shows a higher markup than margin.
How do you calculate sell price from a desired markup?
Multiply the cost by one plus the markup as a decimal: price = cost × (1 + markup ÷ 100). A $100 cost with a 50 percent markup sells for 100 × 1.50 = $150. This is the fastest method when you set prices as a fixed percentage above cost.
How do you calculate sell price from a desired margin?
Divide the cost by one minus the margin as a decimal: price = cost ÷ (1 − margin ÷ 100). A $100 cost at a 20 percent margin sells for 100 ÷ 0.80 = $125. Margin-based pricing guarantees a target percentage of every sale is profit.
Why does confusing markup and margin cost contractors money?
Applying a 20 percent markup when you meant a 20 percent margin under-prices the job. A 20 percent markup on $100 is $120, but a 20 percent margin requires $125. On large or repeated jobs that gap erodes real profit, which is exactly why the contractor license business and law exam tests the distinction.
Is markup always higher than margin?
Yes, for any profitable job. Since markup divides profit by the smaller number (cost) and margin divides the same profit by the larger number (price), the markup percentage is always greater than the margin percentage. A 50 percent markup equals a 33.33 percent margin; a 100 percent markup equals a 50 percent margin.
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