Markup vs margin

Both describe the gap between what a job costs you and what you charge for it, and they are not the same number. The confusion is not academic and it does not average out: it runs one way, toward pricing too low, and it repeats on every job until someone notices that a busy year did not pay like one.

The two definitions

  • Markup is measured against your cost: what you add on top of what the job costs you.
  • Margin is measured against your price: what you keep out of what the client pays.
  • The same job therefore has two different percentages, and margin is always the smaller of them.
  • Suppliers and trade pricing talk in markup; accountants, lenders and your own year-end talk in margin.

That is the whole trap. Someone decides the business needs a 30% margin, adds 30% to cost, and books a year of work at a 23% margin without a single wrong invoice being sent.

Going from cost to price

  1. Get the cost right first

    Materials, your hours at what your time is actually worth, subcontractors, travel, disposal, and the share of the job that will be spent on the phone. A margin applied to an understated cost is a decimal point of comfort over a number that was wrong.

  2. Decide the margin you need, not the markup you are used to

    The margin is the one that has to cover overheads, quiet months and tax. Start from what the business needs to keep.

  3. Convert once, deliberately

    Divide the cost by one minus the margin: for a 30% margin, cost divided by 0.7. Adding 30% instead is the mistake, and it is invisible on the document.

  4. Check the price against the market, not against your arithmetic

    The calculation tells you what you need. It does not tell you what the job is worth in your area, and the answer to a price the market will not carry is rarely a thinner margin.

Where this shows up in an estimate

Line by line, usually. Materials get a markup because that is how suppliers talk, labour gets a rate that already has margin baked into it, and nobody checks what the finished document keeps overall. Total the estimate, take your cost off it, and divide by the total — that percentage is what the job actually pays.

Price a job and send it

Common questions

Which should I use when pricing?
Think in margin, because that is what the business keeps and what has to cover everything that is not this job. Use markup when you are talking to suppliers or applying a standard uplift to materials — just convert before you decide the price is right.
Is there a standard margin for trade work?
It varies too much by trade, region and how much of the price is materials for a single number to be worth repeating. The useful benchmark is your own: work out what your finished jobs actually kept last year, which is usually less than people expect.
Do I show markup on the estimate?
Almost never as a separate line. Clients read an itemised margin as something to negotiate away, and it invites a conversation about your costs rather than about the work. Price the line and let the line stand.

Figures on this page last reviewed 2026-08.

Related guides