Markup vs margin: 25% markup is not 25% margin

FAQ

Is 25% markup the same as 25% margin?

No. Markup = profit / cost. Margin = profit / sell price. 25% markup = 20% margin. Cost $100, 25% markup → sell $125, profit $25. Margin is $25 / $125 = 20%, not 25%. People who bid 25% margin when they meant 25% markup underprice the job.

How do I convert markup percent to margin percent (and back)?

Sell = cost × (1 + markup). Margin = markup / (1 + markup). Cost $100 at 25% markup → $100 × 1.25 = $125, margin 0.25 / 1.25 = 20%. The other way: sell = cost / (1 − margin). Cost $100 at 20% margin → $100 / 0.80 = $125, markup 25%. This page is bidirectional: cost + markup%, cost + margin%, or cost + sell.

What if I already know cost and sell price?

Both percents fall out of the same two numbers. Cost $100, sell $125: profit $25, markup $25 / $100 = 25%, margin $25 / $125 = 20%. Sell = cost is 0% markup and 0% margin. Sell below cost is flagged as a loss (negative markup and margin). Empty fields are invalid.

Can margin be 100%?

Not on a positive cost. Margin = profit / sell, so 100% margin means profit equals the sell price and cost is $0. Sell price would be infinite. 100% markup is different and legal: cost $100 → sell $200, which is a 50% margin. This calculator flags 100% (or higher) margin instead of printing a fake price.

Is this a quote, a tax calculator, or a job estimator?

No. It is shop math: markup versus margin on a cost and a sell price. No line items, no sales tax, no hours, no materials takeoff. Job-site calculators (concrete, gravel, mulch, drywall, and the rest) live on the Acorn hub. Money-adjacent pages are hourly salary and paycheck estimate. Business days helps Net 30 invoicing. Break-even units covers how many jobs pay the fixed costs. This page does not write a quote.

Why do contractors mix up markup and margin?

The percents look interchangeable until you work a fixture. $100 → $125 is a 25% markup and a 20% margin. If a shop wants a 25% margin they must sell at $133.33, not $125. The unique angle on this page is that 25% markup is not 25% margin, and the three directions (markup → sell, margin → sell, cost + sell → both) stay in one calculator.

How is markup different from break-even?

Markup prices one job: cost $100 at 25% markup → sell $125, which is 20% margin. Break-even asks how many of those jobs cover fixed costs. Contribution per unit is sell − variable cost. If fixed costs are $2,000 and each unit contributes $25, break-even is 80 units ($2,000 / $25). Markup does not know fixed costs; break-even does not pick the percent. Use this page for the percent, then break-even units for the unit count. Neither is a quote.

Is margin the same as contribution margin?

No. Margin on this page is profit ÷ sell for one job — shop gross-margin math. Contribution margin is sell − variable cost, the dollars left to cover fixed costs. Same fixture: cost $100, sell $125 → margin is 20% ($25 / $125); contribution is $25 per unit. Break-even divides fixed costs by that contribution ($2,000 fixed / $25 = 80 units). Markup and margin pick the percent; contribution feeds the unit count. Use this page for the percent, then break-even units for the count. Neither writes a quote.

Should labor and materials get the same markup percent?

Not automatically. This page applies one percent to one cost line. Materials often carry a different markup than labor because risk, waste, and overhead differ. Example: materials cost $400 at 20% markup → sell $480 (margin 16.7%); labor cost $600 at 35% markup → sell $810 (margin ~25.9%). Blended job cost $1,000 → blended sell $1,290 → blended markup 29%, blended margin ~22.5%. Do not force one shop-wide percent onto both buckets unless that is your policy. Markup ≠ margin (25% markup = 20% margin on a single line). After you set percents, use break-even units for how many jobs cover fixed costs. Not a quote, not tax, not payroll.

Does a 50% markup double the price?

No. A 50% markup means sell = cost × 1.5, not × 2. Doubling the price is a 100% markup. Fixture: cost $100 at 50% markup → sell $150 (margin 33.33%); cost $100 at 100% markup → sell $200 (margin 50%). The conversion table on this page already shows both rows. Markup ≠ margin (25% markup = 20% margin on a single line). After you set the percent, use break-even units for how many jobs cover fixed costs. Not a quote, not tax, not payroll.

If I discount 10% off a 25% markup price, what happens to my margin?

Start from cost $100 at 25% markup → sell $125, which is 20% margin (already on this page). A 10% discount off the sell price: $125 × 0.90 = $112.50. Profit left = $112.50 − $100 = $12.50. Realized margin = $12.50 / $112.50 ≈ 11.11% (not 20%, and not “25% minus 10%”). Realized markup on cost = $12.50 / $100 = 12.5%. Trap: percent-off the sell price eats margin much harder than people expect; 10 points off the sticker is not 10 points off the margin. This page still prices one undiscounter line (cost + markup/margin/sell). It does not apply discounts. After you set the percent, use break-even units for how many jobs cover fixed costs. Not a quote, not tax, not payroll.

If my cost rises from $100 to $110, do I keep the same 25% markup or the old $125 sell price?

Keep the markup percent, not the old sticker. Old: cost $100 at 25% markup → sell $125 (20% margin, $25 profit). New cost $110: re-apply 25% markup → sell $137.50 (still 20% margin, $27.50 profit). Freeze the old $125 sell → profit only $15 → margin 12% and markup ≈13.6% — you ate your margin. Trap: supplier price hike + frozen bid destroys margin. After you re-price, use break-even units for how many jobs cover fixed costs and business days for Net 30 due dates. Not a quote, not tax, not payroll.

Is keystone pricing the same as a 50% markup on this page?

No. Keystone retail means double the cost = 100% markup = 50% margin. A 50% markup is only cost × 1.5 (sell $150 on $100, margin 33.33%). Fixture: cost $100 keystone → sell $200 (100% markup / 50% margin); cost $100 at 50% markup → sell $150 (33.33% margin). Trap: people hear “keystone / 50% margin” and type 50% markup. This page prices one undiscounter line; it does not apply sales tax. After you set the percent, use break-even units for how many jobs cover fixed costs and business days for Net 30 due dates. Not a quote, not tax, not payroll.

Do I include sales tax in cost or sell price on this markup page?

No. Markup and margin math on this page is pre-tax. Enter product or labor cost and the pre-tax sell only. Fixture: cost $100, 25% markup → pre-tax sell $125, margin 20%. An 8% sales tax on top makes the customer pay $135; that tax is not profit and does not change the 20% margin on $125. Trap: putting tax into cost or sell inflates or deflates markup % and mixes a remittance with shop margin. This page does not compute tax. After you set the pre-tax price, use break-even units for how many units cover fixed costs and business days for Net 30 due dates. Not a quote, not a tax calculator, not payroll.

If my vendor charges $20 freight on a $100 item, do I markup $100 or the $120 landed cost on this page?

Markup the landed cost you want margin on. Product $100 + freight $20 = $120 cost at 25% markup → sell $150 (profit $30, margin 20%). Trap: markup product-only $100 → $125 then tack freight onto the customer → $145; true cost is still $120 so profit is only $25 → ≈20.8% markup / ≈17.2% margin — under the 25% you thought you set. This page has one cost field: put landed cost (product + inbound freight you absorb) in it. The page does not split freight lines. After you set the price, use break-even units for units vs fixed costs and business days for Net 30 due dates. Not a quote, not tax, not payroll.

If my customer pays by card and the processor keeps 3%, does that come out of my markup on this page?

Yes, the fee comes out of your profit, and this page does not subtract it for you. Fixture: cost $100 at 25% markup → sell $125, margin 20%. A 3% card fee on $125 is $3.75, so you keep $21.25 → 21.25% markup / 17% margin. Trap: bumping markup by 3 points to 28% → $128 still leaves $24.16 after the $3.84 fee, about 18.9% margin, not 20%. Fix: add the fee rate to the margin you want and enter that in the margin field. 20% margin + 3% fee = 23% margin → sell $129.87; the 3% fee is $3.90 and $25.97 profit is 20% of $129.87. Fee rates vary by processor and card; use your own. Then use break-even units for units vs fixed costs and business days for Net 30 due dates. Not a quote, not tax, not payroll.