What do I actually keep on this job?
See your price, your real margin, and what is left after overhead.
How these numbers are worked out
Every percentage in pricing is a percentage of something, and the something changes. That's the whole trick. It's also why two numbers that both say twenty percent are not the same money.
Markup is a percentage of your cost. You paid $4,000 for materials, you add 20%, you charge $4,800. The $800 is your gross profit on that line.
Margin is a percentage of the price. That same $800 out of $4,800 is a 16.7% margin. Not 20%. The number didn't shrink, because all you did was measure it against a bigger denominator.
When each line of a job carries its own markup, the job's blended markup is the cost-weighted average of them: total gross profit divided by total cost. The blended margin is not the average of anything you can eyeball. It's total gross profit divided by total price. It's never higher than markup, and it's lower whenever gross profit is positive.
Then overhead comes out. Your insurance, the truck payment, the phone, the evenings you spent writing quotes for jobs that went to someone else. None of that is in the job's cost, and all of it has to come out of the gross profit before a dollar is yours. Subtract your share for this job and you get net profit. Divide that by the price and you get net margin, which is the number that decides whether you had a good year.
The break-even markup is that same overhead expressed the way you actually price: overhead divided by job cost. On a job with $8,200 of cost carrying $1,000 of overhead, that's 12.2%. Price below a 12.2% markup and a job that looks thin is already losing money.
Two more things come off the top rather than out of the cost. A customer discount is a percentage of the price, so a 10% discount on a job with a 19.2% margin doesn't cost you 10% of your profit. On the example job it costs $1,015 of a $1,950 gross profit and takes the net from $950 to minus $65. And card fees are a percentage of what you charge, not of what you spent, which is why 2.9% feels small and lands entirely on your margin.
All of it is arithmetic. There's no model, lookup table or industry average behind any of it. It runs in your browser, on your numbers, and nothing you type is sent to us or saved by us. The only copies that outlive this page are the ones you make yourself: a shareable link or an email draft carries the numbers with it until you delete it.
markup measures against this
margin measures against this
COSTGROSS PROFIT
Common questions
Is markup the same as profit margin?
Not once the job makes a gross profit. At zero profit both numbers are 0%. Markup measures profit against what the job cost you. Margin measures the same profit against what you charged. Same profit dollars, bigger denominator, smaller percentage. A 25% markup is a 20% margin. A 20% markup is a 16.7% margin. Read a positive markup as the share you keep and you'll overestimate the profit.
What is a 20% markup as a margin?
16.7%. Take the markup and divide it by one plus itself: 0.20 / 1.20 = 0.167. The same arithmetic gives you 9.1% for a 10% markup, 20% for a 25% markup, and 33.3% for a 50% markup. Notice that a 50% markup doesn't get you anywhere near a 50% margin. For that you'd have to double your cost.
What markup do I need for a 30% margin?
42.9%. Divide the margin you want by one minus itself: 0.30 / 0.70 = 0.429. A 20% margin needs a 25% markup. A 40% margin needs a 66.7% markup. This is the direction that catches people out. Add 40% to your cost and you land at a 28.6% margin, not 40%, and by the time you notice, the job is finished.
Does markup include overhead?
It has to, or you're working for free. Your markup is the only thing standing between your job costs and everything else you pay for: insurance, the truck, the phone, the quotes you didn't win. Gross profit is what the markup produced. Net profit is what's left after overhead comes out of it. Put your overhead for the job into the calculator above and it will tell you the markup at which those two exactly cancel. Below that number the job costs you money to do.
How much should I mark up materials?
We're not going to tell you, and be careful with anyone who does. The markup numbers circulating on contractor calculator pages trace back to inventory-software blogs, point-of-sale vendors and each other, and none of them knows your overhead, your market or your risk. Work it the other way around. Put your real costs and your real overhead in, decide what you need to clear, and read off the markup that gets you there. That number is yours and you can defend it in front of a customer.
Should I mark up subcontractor work?
That's your call, and the calculator gives subs their own line so you can price them differently from your own labor. What it will show you is what the choice costs. Set the sub line to 0% and watch the blended markup fall while the job cost stays the same. The coordination, the scheduling, the phone calls and the liability are all still yours, and at 0% none of them is paid for.
How much does a 10% discount really cost me?
Far more than 10% of your profit, because the discount comes off the price and your profit is only a slice of the price. On the example job loaded above - $8,200 of cost, priced at $10,150 - a 10% discount takes $1,015 off the top. Gross profit goes from $1,950 to $935, and after $1,000 of overhead the job turns a $950 profit into a $65 loss. If you know a discount is coming, build it in by dividing. To still take $10,150 for the job after taking 10% off, you have to list at $11,277.78. That's an 11.1% uplift, not 10%.
What is a good profit margin for a contractor?
The honest answer is that we have no US figure we'd stand behind, so we don't print one. Every typical-markup table we found while building this tool cited a retail or restaurant source, a software vendor's blog, or nothing at all. What we can tell you is the shape of the problem. Your break-even markup is your overhead divided by your job cost, and anything you price above it is the only profit you'll ever see. Work out that number for your own jobs before you go looking for someone else's.
Does this save my costs anywhere?
No. There's no account, no sign-up, no cookie, no upload. The arithmetic runs in your browser, and nothing you type is sent to us or saved by us. The one exception is the one you make yourself: copy a shareable link or open an email draft and the numbers ride along inside that link or draft until you delete it. That's deliberate. You're typing your actual cost structure into this thing, and it is nobody's business but yours.
Why the two numbers part ways
Restoration work has a familiar shorthand: ten and ten. In the non-cumulative version, ten percent for overhead and ten percent for profit both use the job-cost base. That's a 20% markup. CapOut's insurance glossary uses that version. Xactimate itself lets estimators choose whether overhead and profit are cumulative.
That 20% markup converts to a 16.7% margin, not 20%. The ten points meant for overhead cover it only when your overhead is about ten percent of cost, and that's a question for your books rather than the convention. Chip Merlin, who sues insurers for a living, calls the figure "this Xactimate myth of 10% Overhead and 10% Profit". He's arguing a different case than we are, but the arithmetic he's arguing from is the arithmetic on this page.
That's the whole lesson in one trade convention. A markup is a percentage of cost. A margin is a percentage of price. A discount is a percentage of price. A card fee is a percentage of price. Overhead is different: it's a lump of dollars that comes out of the difference, and the difference is smaller than it looks.
| Markup (of cost) | Margin (of price) |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 40% | 28.6% |
| 50% | 33.3% |
| 100% | 50.0% |
| Margin (of price) | Markup (of cost) |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
Both tables are static HTML and work with JavaScript switched off.
The cheapest margin you will ever buy back
Look at what the discount did to that job. The fastest way to stop discounting is to stop arriving as a stranger, and a listing with us costs you nothing at all. Not a fee, not a referral cut. Our own words to contractors: "Hard work deserves unsolicited, not paid-for recognition", and "we don't charge you for accessing homeowners information once matched. The customer pays you directly, and Industry Oversight does not collect any referral fee".
Or see who you are up against in your trade:
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You have a number. Now put it in front of the customer: Contractor Quote and Estimate Builder turns this price into a line-item estimate you can send.
And when the job is done and the review isn't the one you wanted: Negative Review Reply Generator.
Bookmark this one. It's the kind of thing you want open on the phone while you're standing in the customer's kitchen doing the arithmetic in your head.