You quote a job at $10,000. Your costs are $8,000. You added a 25% markup, so you’re making 25% profit, right?

Wrong. You’re making 20%.

This math mistake costs contractors real money on every job.

The Difference

Markup = percentage added ON TOP of your costs.

Margin = percentage of the final price that’s profit.

Same job, calculated both ways:

Your costs	$8,000
With 25% markup	$8,000 × 1.25 = $10,000
Your profit	$2,000
Actual margin	$2,000 ÷ $10,000 = 20%

You added 25% markup but made 20% margin. On $500k annual revenue, that 5-point gap is $25,000.

The Formulas

Selling price from markup:

Selling Price = Cost × (1 + Markup%)

$8,000 cost × 1.30 (30% markup) = $10,400

Selling price from target margin:

Selling Price = Cost ÷ (1 - Margin%)

$8,000 cost ÷ 0.70 (30% margin) = $11,429

Same cost, same “30%” — but $1,029 more when you price for margin.

Conversion Table

Target Margin	Required Markup
10%	11.1%
15%	17.6%
20%	25.0%
25%	33.3%
30%	42.9%
35%	53.8%
40%	66.7%
50%	100.0%

The gap widens as you go up. A 50% margin requires doubling your costs (100% markup).

Why This Matters

Most contractors use markup because it’s simpler. But your overhead doesn’t care about your markup—your truck payment, insurance, and tools are fixed costs that eat into your margin.

Example:

Job costs: $8,000
20% markup: $1,600
Selling price: $9,600
Gross margin: 16.7%

Subtract 10% overhead:

Overhead: $960
Actual profit: $640
Net margin: 6.7%

You thought 20%. You got 6.7%. One callback wipes it out.

What Should You Charge?

Typical contractor overhead: 15-25% of revenue

Vehicle, gas, maintenance
Insurance (GL, workers comp)
Tools and equipment
Office, phone, software
Non-billable time (estimating, meetings)

Target profit: 10-20% (after overhead, not including your salary)

The math:

20% overhead + 15% profit = 35% margin needed
35% margin = 53.8% markup

To net 15% profit with typical overhead, you need to mark up direct costs by over 50%.

”But My Competitors…”

“I’ll lose every bid at those prices.”

Consider:

Are your competitors profitable? Many stay busy and broke.
Are you comparing fairly? The low bidder might be uninsured or cutting corners.
Do you want price-shoppers? They’re usually the worst clients.

Contractors who price correctly compete on quality and reliability, not price. Those customers exist.

How to Fix Your Pricing

1. Know your overhead. Track all business expenses for 3 months. Divide by revenue.

2. Set a profit target. 10% is survival. 15% is stable. 20%+ is growth.

3. Calculate required margin. Overhead + profit target = margin.

4. Convert to markup. Markup = Margin ÷ (1 - Margin)

Example:

Overhead: 22%
Profit: 15%
Margin needed: 37%
Markup: 0.37 ÷ 0.63 = 58.7%

5. Apply it consistently. Every job. No discounts for “easy” work or “good” customers.

Calculator

Skip the math. Use our Markup Calculator to convert between markup and margin instantly.

Common Mistakes

Forgetting your own time. If you’re working the job, your labor is a cost. Price it.

Marking up only materials. Markup goes on total direct costs: materials + labor + subs.

Discounting to win. A 10% discount on a 15% margin job drops you to 5%. That’s barely worth showing up.

Ignoring risk. Difficult clients, tight timelines, and complex jobs need higher margins.

Quick Reference

20% margin: 25% markup. $10k costs → $12,500 price.

30% margin: 42.9% markup. $10k costs → $14,286 price.

40% margin: 66.7% markup. $10k costs → $16,667 price.

Bottom Line

Markup and margin aren’t the same. Confusing them costs you money on every job.

Know your overhead. Set a profit target. Calculate the markup you need. Charge it.

Price jobs faster. SnapScope turns job site photos into estimates with your markup built in.