At a glance
- Markup
- Profit as a share of cost
- Margin
- Profit as a share of price
- 30% markup equals
- 23% margin
- To get a 30% margin
- Mark up by about 43%
- Formula
- Price = Cost divided by (1 minus target margin)
Prices and rules change. Verify every item with the vendor or agency before you rely on it.
Short answer: Markup is profit measured against cost. Margin is profit measured against price. A 30% markup on a $1,000 job gives a $1,300 price, but that $300 is only 23% of the price. If your overhead is 25% of revenue, a 30% markup leaves nothing. To hit a 30% margin you mark up by about 43%.
Updated October 12, 2026. Requirements and fees change; confirm with the agency named on this page.
This is the single most common pricing error in small contracting businesses, and it hides well because the job still looks profitable on the invoice. The owner marks up materials and labor by 30%, pays overhead that runs 25% to 30% of revenue, and wonders at year end where the money went. The answer is in two words that sound alike.
What is markup?
Markup is the amount you add to cost, expressed as a share of cost. Cost $1,000, markup 30%, price $1,300. Formula: Price = Cost multiplied by (1 + markup).
What is margin?
Margin is the profit as a share of the price the customer pays. On that same $1,300 job, profit is $300 and the margin is $300 divided by $1,300, which is 23%. Formula: Margin = (Price minus Cost) divided by Price.
Why the gap matters
Overhead is measured against revenue, not cost. If your overhead is 25% of revenue and your margin is 23%, every job loses 2% before you pay yourself. The invoice says you made $300. The business made nothing. This is why "I'm busy but broke" is the most common sentence in year two. Our guide on a busy month with no money in it walks through a real example.
The conversion table
| Markup on cost | Margin on price |
|---|---|
| 10% | 9% |
| 20% | 17% |
| 25% | 20% |
| 30% | 23% |
| 43% | 30% |
| 50% | 33% |
| 67% | 40% |
| 100% | 50% |
Read it from the right. Decide the margin the business needs, then look up the markup that gets you there.
How to price from margin instead
Stop multiplying cost by a markup. Divide cost by (1 minus the margin you need). For a 30% margin: $1,000 divided by 0.70 is $1,429. For a 40% margin: $1,000 divided by 0.60 is $1,667. The job margin calculator does this for any job, and the pricing guide shows where the margin target comes from.
What margin should a contractor target?
Enough to cover overhead and leave a real profit, which depends on your overhead. Work it out from your own books: overhead as a share of revenue, plus the profit you need to fund slow months, equipment and your own pay. The break-even calculator gives you the floor. Anything below it is a job you paid to do.
Two habits that fix this for good
- Build every price book line from margin, never from markup.
- Review gross margin by job type every month, so the lines that miss get fixed before the quarter ends.
This guide is general business education, not legal, tax or financial advice. Your numbers come from your own books.
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Common questions
What is the difference between markup and margin?
Markup is profit as a share of cost. Margin is profit as a share of price. A 30% markup on a $1,000 cost gives a $1,300 price and a $300 profit, which is a 23% margin, not 30%.
What markup gives a 30% margin?
About 43%. Divide cost by 0.70 instead of multiplying by 1.30. On a $1,000 cost that is a $1,429 price. The job margin calculator does the division for any job.
What profit margin should a contractor have?
Enough to cover overhead as a share of revenue and still leave a real profit. It depends on your own overhead, so run the break-even calculator on your numbers rather than using a national average.