Why does a 30% markup only leave a 23% margin?

Because the two percentages are not measuring the same thing, and nobody ever tells you that.

Markup asks: how much did I add on top of what this cost me? Margin asks: how much of what the customer paid did I get to keep? Same dollars of profit, two different denominators, two different answers. Margin is always the smaller number, and the bigger the percentage, the wider the two drift apart.

Here it is with the arithmetic written out, on the job in the calculator above.

Now run it the other way. You want to keep 30% of the invoice on that same $7,692.31 cost. If profit is 30% of the price, then cost is the other 70%. So the price is the cost divided by 0.70, not the cost times 1.30.

So the two numbers that both get called "thirty percent" are $10,000.00 and $10,989.01. That is $989.01 of price, and $989.01 of pure profit, because your cost did not move an inch between the two lines.

The two conversions are worth writing on the inside of your estimate folder, because you will never need anything else from this subject:

What does the mix-up actually cost a shop?

A contractor posted this on r/Contractor in June 2026, and it is the cleanest description of the problem anyone has written:

"I kept underpricing jobs for 2 years until I learned the difference between markup and margin… I was quoting jobs at '30% profit' and wondering why I was barely breaking even. Turns out I was confusing markup with margin. A 30% markup is only a 23% margin. On a $10k job that's $700 you're leaving on the table. Every. Single. Job."

He is right to the dollar. On a $10,000 invoice, a true 30% margin is $3,000 of profit. A 30% markup on the cost that produced that $10,000 invoice is $2,307.69. The gap is $692.31, which rounds to the $700 he quoted from memory.

There is a shortcut for the size of the hole. If P is the percentage you quote, the share of every invoice you lose by reading it as a markup instead of a margin is P² ÷ (1 + P).

Notice how fast it grows. The people quoting bigger percentages, who feel like they are the ones charging properly, are losing the most. At 50% the mistake costs a sixth of the revenue.

Put volume on it and it stops being an accounting curiosity. Forty-five jobs a year at a $6,500 average ticket is $292,500 of revenue. Losing 6.92% of that is $20,250 a year — for most one-truck shops, more than the truck, the insurance and the phone combined. Two years of it, which is what the poster above described, is $40,500.

And the fix is small. Going from a 30% markup to a 30% margin raises the price 9.89% on the same cost. That is $989.01 on a $10,000 job. It is not a number customers walk away over, and there is no new marketing, no new hire and no new truck involved. You already decided to charge it. You just did the division backwards.

What is the full markup to margin conversion table?

Read the left half if you know your markup and want to know what margin it leaves. Read the right half if you know the margin you want and need the markup to get there. The last column is the one to use on site: it is the single number to multiply your cost by.

Three things fall straight out of that table once you look at it for a minute.

• Doubling your cost is a 50% margin, not a 100% one. "I double it" is the most common pricing rule in the trades and it keeps half the invoice. Plenty of people think it keeps all of it.
• A 100% margin cannot exist. It would mean the job cost you nothing. Anyone quoting a margin above about 60% is either quoting markup or selling something with no material in it.
• The gap explodes at the top end. At 10% the two readings are a third of a point apart. At 70% they are 192 points apart. Low-markup trades can be sloppy about the vocabulary; high-markup ones cannot.

Should materials and labor be marked up the same?

Ask ten contractors and you get ten answers, in ten different vocabularies. Here is a thread titled "25% Markup on materials?" on r/Contractor, three replies from the same conversation:

"I've seen 50-100% mark up on material."

"I run a 50% markup on labor and material. Labor is a cost. Not profit."

"I charge 20% on materials and for overhead but everywhere is different."

Those three people are not disagreeing about pricing. They are using three different words for three different things and comparing them anyway. The second one has the most important sentence in the thread: labor is a cost, not profit. The money you hand a helper on Friday left your account the same way the box of fittings did. If you bill labor at what it cost you, you have sold your crew's time at break-even and the business earned nothing for carrying the payroll, the workers' comp and the risk.

The practical reason materials usually carry a lower markup than labor is that a customer can price-check a faucet on their phone in the driveway and cannot price-check your hours. A markup that survives daylight on materials tends to be smaller than one on labor. That is a sales reality, not an accounting rule.

The thing that actually bites is the blend. Say you mark materials up 20% and labor up 50%:

Average 20 and 50 in your head and you get 35. The real blended markup is 38% because the labor line is bigger, and the real margin is 27.54%. Change the mix — a job that is mostly a $9,000 boiler and four hours of labor — and the same two markups blend to something completely different. This is why per-line markups need a per-job blended margin next to them, which is what Step 5 above does. A shop that quotes the same two markups all year can still have wildly different margins job to job purely because of the material-to-labor mix.

What do the paid tools charge to do this?

Markup and margin math is arithmetic, but the software that does it for you is sold inside estimating and job-costing platforms, and those are not cheap. List prices as of August 2026.

Sources, compiled August 2026: QuickBooks Online and QuickBooks Online Advanced published pricing · Jobber published plan pricing · Buildertrend and Procore quotes published by a general contractor at roughly $4M revenue on r/Construction, who posted his real quotes because "everyone hides their pricing" · takeoff software range from an r/Construction thread on estimating software costs · Gumroad small-business spreadsheet listings. Prices in this category move — check before you commit.

Two honest notes. First, none of those products exist to teach you markup versus margin. They assume you already know it, and every one of them will happily let you type 30 into a markup field while you think it means margin. The mistake this page fixes is one the $800-a-month product does not catch either.

Second, the thing they genuinely do that a calculator cannot is close the loop. They tell you what the job actually cost when it was finished, against what you estimated. That comparison is where a shop finds out its markup was fine and its hours were not. The same r/Construction thread produced the fairest line in the category: "It's wild how the industry hides pricing just to sell a bloated $1,000/month database that forces you to change how your whole business operates. For a lean team doing $4M, those massive setups are totally out of touch with reality." If you are a $4M shop and you cannot see budget versus actual, buy the software. If you are three people and a truck, fix the arithmetic first, because the software will not.

Where is this calculator enough, and where is it not?

It is enough if you are one to five people, you price jobs yourself, and you want the percentages to mean what you think they mean. That covers most of the shops that lose money on this. Getting the conversion right and applying it consistently is worth more than any estimating platform you could buy this year, because a platform applied to the wrong percentage just makes the wrong price faster.

It is enough to settle an argument on site, to check a supplier's quote, to price a change order properly, and to work out what markup to write on the inside of the folder so you stop doing it in your head.

It is not enough for four things, and it would be dishonest to pretend otherwise.

• Knowing your real cost. Every number here starts with what the job costs you, and that is the part people get wrong. If your labor cost is a wage and not a burdened cost, your margin is fiction. Run a person through the employee cost calculator and use that number here.
• Whether the margin is enough. A healthy gross margin still loses money if overhead is bigger. That question belongs to the break-even calculator.
• Job costing after the fact. This page prices the job you are about to sell. It cannot tell you what the last one actually cost when the third trip to the supply house is counted. That needs receipts against a job number, which is a bookkeeping habit before it is software.
• Saving across devices. The save box keeps your numbers in this browser on this device. Clear your browser data and they are gone. There is no account, because there is no server.

How do you use it?

1. Start with the pair you actually know. Most people know their cost and the percentage they have been adding. Pick that in the dropdown, type both, and read the margin line. That is the moment most people find out.
2. Run Step 2 on a real job you have already done. Not a made-up one. Use a real invoice total and the percentage you had in your head when you quoted it, and let it tell you what you actually kept.
3. Put your volume in Step 3. One job's gap is easy to shrug off. The yearly figure is the one that changes behaviour.
4. Decide the margin you want, then get the markup from Step 4. Write down the multiplier, not the percentage. On site, "times 1.4286" is harder to get wrong than "add 42.86 percent."
5. Build your next real quote in Step 5. One line per cost type, each with its own markup, and check the blended margin at the bottom against your target before you send it.
6. Copy or print it into your estimate notes or the job folder, so the next person to look at the quote can see how the price was built.

What margins do trades actually run?

Careful with any number you see quoted here, including these, because gross margin depends entirely on how a shop defines cost. A contractor who counts their own labor as a cost will report a much lower margin than one who does not, on identical work and identical money in the bank. When somebody says "I run 40 percent," the first question is always: forty percent of what, and is your own time inside the cost or outside it?

What can be said cleanly is the direction of travel. Material-heavy work — supply-and-fit boilers, roofing, anything where a big invoice is mostly a box — runs lower margins because the customer can price the box. Labor-heavy and specialist work runs higher, because nobody can price your hours. Service and repair calls run higher than new installation, because the value is speed. Anything sold on price against three other bids runs lowest of all, which is the entire argument for not being the third bid.

The one benchmark worth borrowing from the research is about cost accuracy rather than margin. Someone tracking roughly 2,200 service businesses on r/smallbusiness reported that "labor estimating runs 12% over on average. if hours aren't tied daily to the job, your job costing is fake." Twelve percent over on the labor half of a job will quietly eat a chunk of any margin you set here. Getting the markup right and the hours wrong is only half a fix. The free time clock ties hours to jobs, which is the boring half of this problem.

The mistakes that cost the most, in order

1. Calling markup margin. The whole subject of this page. At 30% it costs 6.92% of every invoice.
2. Leaving your own labor out of cost. If you work on the job and do not charge the job for your hours, every margin you calculate is overstated by exactly the value of your time.
3. Marking up materials but not labor. On a labor-heavy job that is most of the cost base earning nothing.
4. Applying an average markup to a mixed job. The blend is weighted by dollars, not by lines. Two jobs with identical markups can land 10 points apart on margin.
5. Forgetting the costs that are not on the invoice. Trips to the supply house, dump runs, the hour on the phone with the manufacturer, the callback. They are cost. They belong in the cost box before the markup goes on.
6. Discounting off the price instead of the markup. Knock 10% off a $10,000 quote with a 23.08% margin and you do not have a 13% margin, you have $1,000 straight out of $2,307.69 of profit. That is 43% of your money for a 10% discount.

Common questions