A 20% MARKUP IS A 16.7% MARGIN.
They're different numbers and markup is always the bigger one. A contractor who treats his target margin as a markup is short on every job he wins, and no report anywhere flags it.
Type a markup or a margin. The other one follows.
Nothing on this page is sent anywhere. There's no form, no email field and nothing kept when you close the tab. If JavaScript is off, the table below answers the same question.
TWO DIVISIONS, AND WHICH IS WHICH.
Markup is a percentage of what the job cost you. Margin is a percentage of what the job sold for. The base is different, so the two numbers are different, and the difference widens as the percentage rises.
Divide the markup by one plus the markup. A 20 percent markup is 0.20 divided by 1.20, which is16.7 percent. Cost of $100,000 sells at $120,000 and the $20,000 of gross profit is 16.7 percent of the price.
Divide the margin by one minus the margin. A 25 percent margin needs 0.25 divided by 0.75, which is a 33.3 percent markup. This is the direction that costs money when it is skipped, because a target is set as a margin and applied as a markup.
Cost times one plus the markup is the price. Price minus cost, divided by price, is the margin. Run both on one closed job. If they disagree, the markup was applied to the price instead of to the cost, which is a spreadsheet error worth finding once and fixing in the template.
12 MARKUPS, AND WHAT EACH ONE EARNS.
Computed from the arithmetic above at build time rather than typed, so no row can be wrong on its own. Read it either direction.
| Markup on cost | Gross margin on price | On $100,000 of cost |
|---|---|---|
| 5% | 4.8% | Sells at $105,000 |
| 10% | 9.1% | Sells at $110,000 |
| 15% | 13% | Sells at $115,000 |
| 20% | 16.7% | Sells at $120,000 |
| 25% | 20% | Sells at $125,000 |
| 30% | 23.1% | Sells at $130,000 |
| 35% | 25.9% | Sells at $135,000 |
| 40% | 28.6% | Sells at $140,000 |
| 50% | 33.3% | Sells at $150,000 |
| 60% | 37.5% | Sells at $160,000 |
| 75% | 42.9% | Sells at $175,000 |
| 100% | 50% | Sells at $200,000 |
YOUR BAND, CONVERTED.
The industry average gross margin across all 48 trades in the dataset, by revenue band, with the markup that produces it. This is the number an estimator needs and the one nobody publishes, because benchmarks are quoted as margins and bids are built with markups.
| Revenue band | Average gross margin | Markup required |
|---|---|---|
| $1M to $5M | 22.1% | 28.4% |
| $5M to $10M | 23.4% | 30.5% |
| $10M to $25M | 24.6% | 32.6% |
| $25M to $50M | 25.7% | 34.6% |
| $50M to $100M | 27.2% | 37.4% |
| $100M to $500M | 28.5% | 39.9% |
| $500M+ | 30.3% | 43.5% |
An average isn't a target. Your own trade's figures are on the benchmark pages, and the CFOS target sits a little better than the average on every one of them.
AND THE OTHERS ARE WORKBOOKS.
This conversion is one division with one input, so a web page gives you the whole answer in a keystroke and there's nothing left to keep. An overhead rate is eight cost categories and a denominator that changes when revenue changes. An equipment cost basis is ten fields per unit across a whole fleet, revised when a machine is bought or sold. Those are files you own, update and take to your estimator, so they're published as workbooks rather than as forms that forget your numbers the moment you close the tab.
MARKUP AND MARGIN, ANSWERED.
