Markup is a percentage added to your cost; margin is profit as a percentage of the price you charge. A 50% markup produces a 33.3% margin, not 50%. Price = cost x (1 + markup). Margin = (price - cost) / price. Contractors who confuse the two systematically underprice every job.
Write these on the wall. Cost is everything you spend on the job including materials, labor with burden, subs, equipment and permits.
Markup 10% = 9.1% margin. Markup 20% = 16.7% margin. Markup 25% = 20% margin. Markup 33% = 25% margin. Markup 43% = 30% margin. Markup 50% = 33.3% margin. Markup 67% = 40% margin. Markup 100% = 50% margin. If you need a 35% margin, you must mark up 54%.
A contractor who wants a 35% margin but applies a 35% markup prices a $100,000 cost job at $135,000 instead of $153,846. That is nearly $19,000 of profit given away on one job. Repeat it across a year and it is the difference between growing and closing.
There is no universal number, because markup has to cover overhead as well as profit. Work it backwards: total annual overhead divided by projected annual job cost gives your overhead recovery rate; add your target net profit on top. Many small residential contractors land between 35% and 60% markup once overhead is honestly counted.
A $30/hour employee does not cost $30. Add payroll taxes, workers' compensation, insurance, PTO, training and non-billable time and the real cost is often $42 to $50. Estimating at the raw wage guarantees losses no matter how good your markup is.
WinkScope lets you set markup or target margin per line item or per section and calculates the other automatically, including reverse calculation from a target section total. Live margin is displayed while you build the bid, so you never send a job that is quietly underwater.
For gross margin on residential work, 20% is on the low side once overhead is included. Many profitable small contractors target 25% to 40% gross margin, then aim for 8% to 15% net profit after overhead.
Divide the markup by one plus the markup. A 50% markup is 0.5 / 1.5 = 33.3% margin.
Yes. Many contractors mark up materials higher than subcontracted labor, and apply a lower markup to large equipment purchases to stay competitive.