- Margin is profit divided by the price. Markup is profit divided by the cost. They are not the same number.
- A 50% markup is a 33% margin. Pricing with markup when you mean margin is the most common way trades underprice.
- Overhead has to come out of every job. Work out your overhead share once a year and price it in.
Margin and markup are different numbers
Both start from the same profit: the price minus the job cost. Margin divides that profit by the price. Markup divides it by the cost.
Take a job that costs you $2,000 and that you sell for $3,000. The profit is $1,000. The margin is $1,000 ÷ $3,000 = 33%. The markup is $1,000 ÷ $2,000 = 50%.
So when someone says "I run a 50% margin" and prices by adding 50% to cost, they are really running 33%. On a year of $400,000 in sales, that gap is about $67,000.
| If you mark up cost by | Your margin is |
|---|---|
| 25% | 20% |
| 33% | 25% |
| 43% | 30% |
| 50% | 33.3% |
| 67% | 40% |
| 100% | 50% |
To turn a margin into a markup: markup = margin ÷ (1 − margin). To go the other way: margin = markup ÷ (1 + markup).
How to price a job for the margin you want
Divide the job cost by one minus the margin. For a 40% margin on a $2,000 job: $2,000 ÷ (1 − 0.40) = $3,333.
Multiplying instead ($2,000 × 1.4 = $2,800) gives a 29% margin, not 40%. The calculator's "price for a target margin" mode does the division for you and takes your overhead out as well.
Gross margin and net margin
Gross margin is what is left after the costs of the job itself: materials, labor, subs, dump fees, permits. Net margin is what is left after overhead too: the truck, insurance, phone, software, the office, advertising.
A job can show a healthy gross margin and still lose money once overhead is paid. That is why the calculator asks for your overhead as a share of sales. Use the "my margin for the year" mode to work that share out from last year's numbers: overhead ÷ sales.
What margin should a contractor aim for
It depends on the trade, the size of the jobs and how much of the work is service versus install. Service and repair work usually carries a higher gross margin than large install jobs, because the ticket is small and the time on the road is the same.
Rather than copy someone else's target, start from your own numbers: your overhead share plus the profit you want to keep is the least your margin can be. If overhead is 18% of sales and you want to keep 10%, every job needs a gross margin of at least 28%.
Turn the number into a price your customer sees
Once you have the price, send it as an estimate with good, better and best options. Koira keeps your costs on each line, so the margin on every estimate is there when you need it, and the customer can sign and pay a deposit from their phone.
Last checked October 8, 2026.