Construction Markup vs. Margin: How to Price a Job

Two contractors bid the same job. Both have $100,000 in costs. Both say they want "30%." One adds 30% and bills $130,000; the other works backward to a 30% margin and bills $142,857. That's a $12,857 difference on one job — and the first contractor doesn't even realize they left it on the table.

Markup and margin are the most commonly confused numbers in construction pricing, and the confusion always costs you, never the customer. Here's the difference, the formula to convert between them, and how to price so you actually hit the profit you intend.

Markup and margin, defined

Markup is the percentage you add on top of your cost to reach a price. Margin (gross margin) is the percentage of the final price that is profit. Same dollars, opposite reference points:

• Markup % = profit ÷ cost
• Margin % = profit ÷ price

Take a $1,000 cost with a 25% markup. Price is $1,250, profit is $250. But $250 of a $1,250 price is a 20% margin, not 25%. Because price is always larger than cost, the margin is always the smaller number.

The conversion table every estimator should know

The formula is margin = markup ÷ (1 + markup). A few values worth memorizing:

• 15% markup → 13.0% margin
• 25% markup → 20.0% margin
• 33% markup → 24.8% margin
• 50% markup → 33.3% margin
• 100% markup → 50.0% margin

To go the other way — you know the margin you want and need the markup to apply — use markup = margin ÷ (1 − margin). Want a 30% margin? Apply a 42.9% markup, not 30%.

How much markup should a subcontractor use?

There's no universal number, but there is a right way to think about it: your price has to cover overhead and profit as two separate things.

• Overhead is the cost of running the business whether or not you have a job — office, insurance, vehicles, software, office staff. Many subs run this in the 8–15% range of revenue.
• Profit is what you keep after overhead is covered. It's a deliberate target, not whatever happens to be left over.

Build both into your price. Our guide on how to create a construction bid walks through layering overhead and profit onto your direct costs the rest of the way.

Let the system do the math

The reliable fix for markup/margin confusion is to stop hand-marking line items and set your rates once. In BuildWorkPro, the bid Rates tab applies margin, commission, and overhead to the whole estimate, and a live preview rolls your material and labor costs up into the customer total — so the price reflects the margin you actually intend, every time:

The bottom line

Markup and margin describe the same profit from different ends, and the percentages never match. Decide the margin you need to run a healthy business, convert it to the markup that produces it, and apply it consistently. Do that on every bid and you stop donating a slice of your profit to arithmetic.