Markup vs margin calculator
An 18% markup is a 15.3% margin. Pricing at one and reporting the other is the most common way a job that looked profitable comes in short.
- Price to charge
- $33.45
- Margin
- 45%
- Markup
- 81.8%
Same money, two percentages: $15.05 of profit is 45% of the $33.45 price, and 81.8% of the $18.40 cost. Markup is always the bigger number.
The formulas
margin = (price − cost) / price
markup = (price − cost) / cost
price = cost / (1 − margin)
markup = margin / (1 − margin)
Both describe the same profit. They differ only in what they divide it by, and that is why markup is always the larger of the two.
A worked example
A job costs $24,255 — materials, labour, overhead and contingency. You add your usual 18% markup:
markup = 24,255 × 0.18 = 4,366
bid price = 24,255 + 4,366 = 28,621
margin = 4,366 / 28,621 = 15.3%
If you needed a 25% margin, the markup that gets you there is 25 / (1 − 0.25) = 33.3%, and the bid becomes $32,340 — nearly $3,700 more than the 18% habit would have quoted.
Assumptions and limits
- Cost means full cost. Overhead left out here reappears as a margin you never actually earned.
- Price is before any platform, card or marketplace fee. Those come out of the margin shown.
- Sales tax and VAT are excluded — they are not yours.
- This is arithmetic, not pricing advice. It tells you what your costs require, which is a floor, not an answer to what a market will pay.
Doing this across a whole price list?
The calculator above handles one item. These spreadsheets keep the maths for everything you sell, and flag anything priced below cost.
Questions
- What is the difference between markup and margin?
- Markup is profit divided by cost. Margin is profit divided by price. The same $15 of profit on a $20 cost and a $35 price is a 75% markup and a 42.9% margin — one number, two denominators.
- How do I convert a target margin into a markup?
- Markup = margin / (1 - margin). A 45% margin needs an 81.8% markup. Going the other way, margin = markup / (1 + markup).
- Why can't I have a 100% margin?
- Margin is profit divided by price, and profit is always smaller than price whenever cost is above zero. Margin approaches 100% as cost approaches zero, but never reaches it. Markup has no such ceiling.
- Which one should I price with?
- Price with markup because it is arithmetic you can do on a cost, but report and compare in margin, because margin is the share of revenue you keep. Trouble starts when a business prices at a markup and then talks about that number as though it were a margin.
Last updated 22 August 2026. The worked example uses the same figures as the Construction Bid Estimator's sample data, so the two agree.