What is the actual mistake this catches?

Applying your target margin percentage as a markup on cost undershoots the real target every time, since markup and margin are measured against different bases (cost versus price) and are not interchangeable numbers.

Can you give a concrete example of the gap?

A 30% margin target needs a price of cost divided by 0.70, a markup of about 42.9%, not 30%; using 30% as the markup instead delivers only a 23% margin, well under target.

Does this error get worse at higher targets?

Yes, the gap between markup and margin widens as the target percentage increases, so the mistake costs more in dollar terms on higher-margin jobs, not less.

Which number should show up in a bid?

The required price this calculator solves for, back-computed correctly from your margin target, not a markup percentage applied directly to cost.

Pricing & Bids

Markup 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.

Job cost$ totalTarget margin% of the final price

Correct price (margin)$1,333.33Equivalent to a 33.3% markup

If priced as a markup instead$1,250Actually realizes 20.0% margin

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%

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Next Decision

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Want to Learn More?

GuideThe Markup vs. Margin GuideUsing your target margin as a markup is the single most common contractor pricing mistake. This guide shows exactly what it costs on a real job, in dollars.

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.

Guide: The Markup vs. Margin Guide, the exact dollar cost of this mistake, worked out on a $10,000 job.

Frequently Asked

What is the actual mistake this catches?: Applying your target margin percentage as a markup on cost undershoots the real target every time, since markup and margin are measured against different bases (cost versus price) and are not interchangeable numbers.
Can you give a concrete example of the gap?: A 30% margin target needs a price of cost divided by 0.70, a markup of about 42.9%, not 30%; using 30% as the markup instead delivers only a 23% margin, well under target.
Does this error get worse at higher targets?: Yes, the gap between markup and margin widens as the target percentage increases, so the mistake costs more in dollar terms on higher-margin jobs, not less.
Which number should show up in a bid?: The required price this calculator solves for, back-computed correctly from your margin target, not a markup percentage applied directly to cost.