Markup and margin are not interchangeable
If a job costs $8,000 and you add a 25% markup, the selling price is $10,000. The $2,000 gross profit is only 20% of the selling price, so the margin is 20%—not 25%.
Use markup as a multiplier on a known cost.
Use margin to judge how much of the revenue remains after that cost.
Markup-to-margin conversion table
| Target margin | Required markup | Price on $1,000 cost |
|---|---|---|
| 10% | 11.1% | $1,111.11 |
| 20% | 25% | $1,250.00 |
| 25% | 33.3% | $1,333.33 |
| 30% | 42.9% | $1,428.57 |
| 35% | 53.8% | $1,538.46 |
| 40% | 66.7% | $1,666.67 |
| 50% | 100% | $2,000.00 |
How to convert a target margin into markup
Divide the target margin by one minus the target margin. For a 30% target margin: 0.30 ÷ (1 − 0.30) = 0.4286, or a 42.86% markup. Keep percentages in decimal form during the calculation.
A worked contractor estimate
| Cost | Amount |
|---|---|
| Materials | $3,200 |
| Labor, including payroll burden | $4,100 |
| Equipment and subcontractors | $700 |
| Direct job cost | $8,000 |
At a 25% markup, the quote is $10,000 and gross margin is 20%. If the business needs a 30% gross margin, the quote must be about $11,428.57 before sales tax. CraftBid shows the resulting margin while you price each line.
What your target should include
- Direct wages plus payroll taxes, insurance, benefits, and paid nonproductive time.
- Materials, delivery, waste, small consumables, and price volatility.
- Equipment ownership or rental, fuel, mobilization, and cleanup.
- A defensible share of office, software, vehicles, estimating time, and other overhead.
- Profit for business risk, reinvestment, callbacks, and growth—not just the owner’s wage.
Frequently asked questions
Is a 20% markup the same as a 20% margin?
No. A 20% markup on $100 cost creates a $120 price and a 16.7% margin.
What markup gives a 30% margin?
A 42.86% markup produces a 30% margin before discounts and unplanned costs.
Should overhead be included before profit?
Yes. Treat overhead as a real cost to recover before judging profit, even when it is not shown as a separate client line.
Put the method into a real estimate.
CraftBid keeps costs private, shows margin live, and creates a client-ready quote without an account.
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