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Markup

Markup is the amount added to your cost to reach a selling price, expressed as a percentage of the cost. A $100 cost with a 40% markup sells for $140.

Example

$100 of materials with a 40% markup is priced at $140, which is a 28.6% margin.

Also called a mark-on, or materials uplift when it is applied to materials.

Open the markup calculator

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.

Markup against margin on the same jobA fifty percent markup on a cost of one thousand gives a price of fifteen hundred and a margin of thirty three percent. A fifty percent margin gives a price of two thousand.FIFTY PER CENT OF WHATThe same job, the same cost of 1,000.00, priced twiceCOSTPROFIT50% markup on cost500 on 1,500 is a 33% margincost 1,000500.00= 1,500.0050% margin on price1,000 on 2,000 is a 100% markupcost 1,0001,000.00= 2,000.00Markup is measured against what the job cost you. Margin is measured against what you charged.A 50 percent markup is a 33 percent margin. Quote one thinking it is the other and a third of the profit isgone.
One cost of 1,000, priced twice. Fifty percent of the cost and fifty percent of the price are two different amounts of money, which is where a quote quietly loses its profit.

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.

Common questions

What is markup on materials?

The amount you add to what materials cost you, to cover the time spent sourcing, collecting and carrying them. A contractor who passes materials through at cost is working those hours for free.

How do you calculate markup?

Divide the amount you added by what it cost you. Fifty dollars added to a hundred dollar cost is 50 percent markup. That is not a 50 percent margin, which is the mistake that costs money.

Should markup show on the invoice?

Usually not as its own line. Show the marked-up price against the item and keep your cost to yourself. A separate markup line invites a negotiation you did not need to have.

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.

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