In one line
The amount added to your cost to reach the price, expressed as a percentage of the cost.
Also called a mark-on, or materials uplift when it is applied to materials.
What it means in practice
Markup is applied to cost, margin is measured against price, and they are never the same number. A 20% markup gives a 16.7% margin. A 50% markup gives a 33% margin.
Materials carry markup for a reason: you paid for them up front, you carry the risk of waste and returns, and you spent time sourcing them. Passing materials through at cost gives that time away.
Example. $100 of materials with a 40% markup is priced at $140, which is a 28.6% margin.
Where it shows up on the paperwork
Markup does not print on a client document. It sits inside the rate you quote, which is why the estimator shows both the markup you applied and the margin it produces.
What goes wrong
- Applying a percentage to cost and calling the result the margin.
- Passing materials through at cost to look competitive, giving away the money that pays for sourcing, delivery and returns.
- Using one markup for a $20 fitting and a $2,000 boiler without asking whether either is right.
The tools for this
Related terms
- Gross marginWhat is left of the price after the direct cost of the job, usually shown as a percentage.
- COGS (cost of goods sold)The direct cost of what you sold: the materials and the labour that went into the job.
- Unit priceThe price of one of something: one door, one metre, one hour, one visit.
Common questions
How do I convert markup to margin?
Divide the markup by one plus the markup. A 40% markup is 40/140, which is a 28.6% margin. The markup calculator does it both ways.
What markup should I add to materials?
Enough to cover the time spent sourcing, the risk of waste and returns, and the money you carry until the client pays. Many trades land between 15 and 35 percent, and the right number is the one your own costs justify.