MarginWorksMarkup vs. Margin
Markup and margin are different numbers for the same job. See exactly what treating your target margin as a markup instead actually costs you, and the price that hits your real target.
How we got here
- Correct price = cost / (1 - margin) = $1,000 / 0.75 = $1,333.33
- Mistaken price = cost × (1 + margin%) = $1,000 × 1.25 = $1,250
- Shortfall = correct price - mistaken price = $1,333.33 - $1,250 = $83.33
Correct price at other margins
| Margin scenario | Correct price | Equivalent markup |
|---|---|---|
| Bare (10%) | $1,111.11 | 11.1% |
| Modest (15%) | $1,176.47 | 17.6% |
| Typical (20%) | $1,250 | 25.0% |
| Healthy (25%) | $1,333.33 | 33.3% |
| Strong (30%) | $1,428.57 | 42.9% |
Next Decision
Based on your results, these related decisions are available.
Methodology
Formula: correct price = job cost / (1 - target margin). This solves directly for the price that hits your target margin, rather than guessing a markup percentage and checking the resulting margin afterward.
Assumption: margin is a percentage of the final price; markup is a percentage added on top of cost. They are only equal at 0%, for any positive target, using it as a markup produces a lower price than using it as a margin.
Limitation: this covers a single job's price against a single cost figure. See Job Profit Check to verify a full bid, including labor hours and overhead, actually clears this price.