The single most expensive math mistake in the trades is confusing markup with margin. They sound interchangeable and they are not. Charge a 25% markup thinking you're keeping 25%, and you're actually keeping 20% — and after overhead, maybe nothing.
The difference in one line
Markup is the percentage you add to your cost. Margin is the profit as a percentage of the price you charge. Add 25% markup to a $100 cost and you charge $125, but your profit ($25) is only 20% of that $125 price. The bigger the markup, the wider the gap: a 50% markup is only a 33% margin.
The markup you need for a target margin
To hit a given net margin, use: markup = margin ÷ (1 − margin). For a 20% margin you need a 25% markup; for 30% margin, about 43%; for 40% margin, about 67%. Contractors who set a flat '20% markup' and expect a 20% profit are quietly underpricing every job.
Don't forget overhead
Markup has two jobs: recover overhead (office, insurance, software, admin, idle time) and produce profit. If your overhead is 15% of revenue and you want 15% profit, your markup has to cover both on top of the fully-burdened job cost — not just the 'profit' you have in mind.
Price it in seconds
The Bid & Markup Calculator takes your cost, target margin, and overhead and returns the exact price to charge — separating markup from margin so you stop leaving profit on the table.
Open the free Bid & Markup Calculator →
Frequently asked questions
What markup do most contractors use?
It varies by trade and market, but 20–50% is common. The right number is whatever covers your overhead and target profit on top of fully-burdened cost — not a rule of thumb.
Is a 50% markup a 50% profit margin?
No. A 50% markup produces a 33% margin. Profit as a share of the price is always lower than the markup applied to cost.
How do I convert margin to markup?
Markup = margin ÷ (1 − margin). A 25% target margin needs a 33% markup; a 30% margin needs about 43%.