GUIDE

What is the difference between markup and margin for contractors?

By Ryder Wishart — years on the tools, then time tracking in a contractor’s back office · Updated 2026-06-08

Markup: Adding to your cost

Markup is the amount you add to your expenses to cover overhead and profit. If a part costs you $100 and you apply a 50% markup, you charge the client $150.

It is a simple way to scale up material costs, but it does not tell you how much of your total revenue is actually staying in your pocket.

Margin: Your slice of the pie

Margin is the percentage of your total sales price that is profit. Using the $150 sale price from the example above, your profit is $50. To find the margin, you divide $50 by $150, which equals a 33.3% margin.

Margin is the most important number for understanding your business health and ensuring you can cover your fixed monthly bills.

The Danger of the 'Markup Trap'

Many contractors mistake markup for margin. If you need a 20% profit margin to survive, applying a 20% markup will actually leave you with only a 16.7% margin.

Over a year of jobs, this mathematical error can result in thousands of dollars of lost income because your prices aren't high enough to cover your true overhead.

Calculating the True Cost

You cannot calculate markup or margin without knowing your true costs. This includes your labor time and your travel expenses.

By using an automated log to track every jobsite stop and every mile driven, you ensure that your 'cost' figure includes the hidden expenses that often eat into a contractor's profit.

FAQ

Which number should I use when writing a quote?

Use margin to ensure you cover your overhead, but use markup to quickly estimate price increases on materials.

Does mileage count as a cost for my markup calculation?

Yes, every mile driven is a business expense that should be factored into your total cost before you apply your markup.

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Last updated 2026-06-08.