Margin is profit as a share of the selling price; markup is profit as a share of the cost. On a $100 sale that costs $80, the $20 profit is a 20% margin and a 25% markup. ProfitDrawer's price per job calculator uses margin, so a 20% margin means 20% of the price is profit. To price for a target margin, divide your cost by 1 minus the margin: $80 / 0.80 = $100.
Conversions:
- Markup = margin / (1 minus margin)
- Margin = markup / (1 + markup)
| Margin | Same as markup |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 25% | 33.3% |
| 30% | 42.9% |
| 50% | 100% |
The common mistake is adding a margin percent to cost as if it were markup. If you want a 30% margin on an $80 cost and add 30% to cost, you charge $104 and keep only about 23% of the price. The right price is $80 / 0.70 = $114.29.
Product sellers often talk in markup (cost times a factor), while profit reports and bookkeeping spreadsheets show margin. Pick one, write down which one you use, and use it the same way every time you price.
Source: Price Per Job Calculator for Service Businesses · Updated
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.