Free contractor calculator
Markup vs. Margin Calculator
Compare two commonly confused pricing methods and turn direct job cost into a selling price without giving away the margin you intended to earn.
Reviewed July 11, 2026 · Inputs are calculated locally in your browser
What are you pricing from?
Pick the percentage your estimating process uses. We’ll calculate the selling price and show the equivalent percentage.
Include labor, labor burden, materials, equipment, and subcontractors assigned to this job.
The share of the selling price left after direct job cost.
- Suggested selling price
- $1,333.33
- Gross profit dollars
- $333.33
- Equivalent markup
- 33.3%
Every $1,333.33 of work at this price contributes $333.33 toward overhead and profit after direct job cost.
Saved only in this browser. BuildMetric does not receive these numbers.
How the formula works
Markup measures gross profit against cost: markup % = (price − cost) ÷ cost. Price from markup = cost × (1 + markup).
Gross margin measures gross profit against selling price: margin % = (price − cost) ÷ price. Price from a target margin = cost ÷ (1 − margin).
The denominators are different. To convert markup to margin, divide markup by 1 + markup. To convert margin to markup, divide margin by 1 − margin. Convert percentages to decimals before applying those formulas.
Worked example
Suppose a repair has $1,000 of direct labor and material cost. Adding a 25% markup produces a price of $1,250. Gross profit is $250, but the gross margin is only $250 ÷ $1,250 = 20%.
If the goal were a 25% gross margin, the calculation would be $1,000 ÷ (1 − 0.25) = $1,333.33. Gross profit is $333.33. Using 25% as markup instead of margin would underprice this job by $83.33.
Frequently asked questions
Is a 20% markup the same as a 20% margin?
No. A 20% markup on $100 produces a $120 price and a 16.7% gross margin. A 20% margin requires a $125 price because profit is measured against selling price, not cost.
Should contractors use markup or margin?
Either can work if used consistently. Markup is convenient when building a price from job cost. Margin aligns directly with the gross-margin percentage on a profit-and-loss statement. Many estimating errors happen when a target margin is entered as though it were markup.
Does gross margin include overhead?
Gross margin is selling price minus the direct cost assigned to the work. Whether a cost is direct depends on your accounting policy. Gross profit must generally contribute to overhead and net profit, so gross margin is not the same as net profit margin.
Can margin exceed 100%?
No. Gross margin divides gross profit by selling price, so it remains below 100% when cost is positive. Markup divides profit by cost and can exceed 100%.
Sources and further reading
- U.S. Small Business Administration: Break-even point — general context for understanding costs and revenue planning
- IRS Publication 334 — business income and cost-of-goods-sold concepts for sole proprietors
Limitations
- A target gross margin does not guarantee net profit; overhead, callbacks, financing cost, and unbillable time still need to be recovered.
- The result is only as complete as the job cost. Missing labor burden, waste, subcontractor supervision, or equipment cost will overstate expected margin.
- The calculator does not account for sales tax rules, retainage, discounts, change-order risk, or project-specific contingencies.
Use this result as a planning estimate. Confirm tax, insurance, wage, and contractual decisions with qualified professionals and your current company records.