What you know
Cost to you
Markup %
Quantity
Overhead to recover per unit
Marking up materials alone leaves overhead unpaid.
Convert between the two
Markup to margin
A 30% markup is a 23.1% margin.
Margin to markup
To reach a 30% margin you need a 42.9% markup.
Price to charge
$130.00
$100.00 cost plus $30.00 profit
price = 100.00 x (1 + 0.30) = 130.00
Quoting a markup while thinking of a margin is the most common pricing error there is, and it always favours the customer.
How to calculate markup, and how it differs from margin
Both describe the gap between what something costs you and what you charge. They divide that gap by different numbers.
- Markup divides profit by cost. Buy at $100, sell at $130, and the markup is 30 percent.
- Margin divides profit by price. The same sale is a 23.1 percent margin, because $30 of profit sits inside a $130 price.
Margin is always the smaller number, and the gap widens as the figures rise. Quote a 30 percent markup while thinking you are earning a 30 percent margin and you are almost thirteen dollars short on every hundred of cost. Over a year of invoices that is not a rounding error.
Markup formula
markup % = (price - cost) / cost x 100
Margin formula
margin % = (price - cost) / price x 100
Converting
margin = markup / (100 + markup). markup = margin / (100 - margin).
Markup to margin conversion table
The same sale, described both ways. Read it once and the difference stops being surprising.
10% markup
is a 9.1% margin. For a 10% margin you need an 11.1% markup.
20% markup
is a 16.7% margin. For a 20% margin you need a 25% markup.
25% markup
is a 20% margin. For a 25% margin you need a 33.3% markup.
30% markup
is a 23.1% margin. For a 30% margin you need a 42.9% markup.
50% markup
is a 33.3% margin. For a 50% margin you need a 100% markup.
100% markup
is a 50% margin. Doubling the cost is keystone pricing, and it is a half margin, not a double one.
If you work to a target margin, the profit margin calculator works from the other end and gives the price directly.
Marking up materials on an invoice
Charging materials at cost is the most common way a job earns less than it looks like it did. A markup on materials is not a hidden fee: it pays for sourcing, collection, storage, breakage, returns and the cash tied up between buying and being paid.
- 10 to 25 percent is the usual range on trade materials, higher on small or awkward items.
- State it on the quote: materials charged at cost plus a handling percentage. Written in advance it is a term; discovered later it is an argument.
- Mark up subcontractors too, or their work costs you supervision time you never billed.
- Do not mark up materials and then forget overhead, which is a separate cost and does not come out of the same percentage.
Put the markup on the line, not in the price: an invoice that shows materials, handling and labour separately is easier to defend than one round number.
Cost-plus pricing, and where it goes wrong
Cost-plus is the simplest pricing method there is: work out what the job costs, add a percentage, quote the result. It goes wrong in three predictable ways.
- The cost is incomplete. Materials and labour are easy to see; overhead, travel, quoting time and warranty work are not, and a markup on half the cost recovers half the overhead.
- The percentage is a margin in disguise. See the table above. Decide which one you are quoting and write it in your own notes.
- It ignores what the work is worth. Cost-plus sets a floor, not a price. If the job is worth more to the client than it costs you to deliver, the market decides the rest.
Once the number is settled, the quote generator puts it in writing and the invoice generator bills it with the lines showing.
Markup and margin questions, answered
How do you calculate markup?
Subtract the cost from the price, divide by the cost, and multiply by 100. Buying at $100 and selling at $130 is a 30 percent markup. To go the other way, multiply the cost by one plus the markup as a decimal.
What is the difference between markup and margin?
Markup divides profit by cost; margin divides it by price. The same $100 cost sold at $130 is a 30 percent markup and a 23.1 percent margin. Margin is always the smaller of the two.
What is a 50% markup as a margin?
33.3 percent. Cost $100, price $150, profit $50, and $50 out of $150 is a third. To earn a 50 percent margin you would need to double the cost, which is a 100 percent markup.
How do I convert margin to markup?
Divide the margin by 100 minus the margin. A 20 percent margin needs a 25 percent markup, a 30 percent margin needs 42.9 percent, and a 40 percent margin needs 66.7 percent.
What markup should I use on materials?
Commonly 10 to 25 percent on trade materials, more on small or awkward items. It covers sourcing, collection, storage, breakage and the cash tied up until the invoice is paid, and it belongs on the quote rather than appearing later.
Is a 100% markup the same as 100% profit?
No. Doubling the cost is a 100 percent markup and a 50 percent margin: half the price is cost. This is keystone pricing, and it is standard in retail rather than exceptional.
What is cost-plus pricing?
Working out what a job costs and adding a fixed percentage. It sets a sensible floor, but only if the cost figure includes overhead, travel and quoting time rather than just materials and labour.
What is a good markup percentage?
It depends on what your costs leave out. If your markup has to cover overhead as well as profit, 20 percent is thin. If overhead is already priced separately, the same 20 percent may be comfortable. Work back from the margin you need rather than copying a number.
Should I mark up subcontractors?
Yes, usually 10 to 20 percent. Their work still costs you supervision, coordination and the risk of putting it right, none of which appear on their invoice to you.
How do I show markup on an invoice?
Show materials at cost and handling as its own line, or price the line inclusive and say on the quote that materials are charged at cost plus a percentage. Either is fine; hiding it and being asked is not.
Does markup include overhead?
Only if you put it there. Many businesses mark up materials to cover profit and then find the rent unpaid. Either build overhead into the cost figure first or price it as its own line.
What markup do retailers use?
Keystone pricing, meaning double the wholesale cost, is the traditional benchmark and works out at a 50 percent margin. Discount retail runs far thinner and speciality retail often runs higher.
Is the markup calculator free?
Yes. No signup and nothing uploaded: every figure is worked out in your browser and gone when you close the tab.