Margin vs. Markup: What Every Contractor Needs to Know
Margin and markup are the two most commonly confused financial terms in the trades. Profit margin is the percentage of revenue that is profit: if you charge $1,000 and your costs are $700, your margin is 30%. Markup is the percentage added on top of cost: that same job has a 42.9% markup ($300 profit on $700 cost). They describe the same profit but from different perspectives, and confusing them is one of the most expensive mistakes a contractor can make.
When a contractor says "I mark up materials 20%," they mean they add 20% to cost. A $100 material becomes $120, yielding $20 profit and a 16.7% margin. If they intended a 20% margin, they should charge $125 ($100 / 0.80). Over hundreds of jobs per year, this 4-5% difference between intended and actual margin can mean the difference between a profitable business and one that is slowly bleeding money.
This calculator works in two modes to handle both scenarios. Use "Revenue and Costs to Margin" when you know what you charged and what it cost, and you want to see your actual margin and markup. Use "Cost and Margin to Price" when you know your costs and want to calculate the correct selling price to achieve your target margin. The second mode is especially useful for quoting new jobs.