Markup is profit as a percentage of your cost. Margin is profit as a percentage of the price you charge. They are not the same number, and confusing them underprices every job. A 25% margin equals a 33.3% markup — so a contractor who "adds 25%" thinking it's their margin is actually running a 20% margin.
The formulas
- Markup % = (price − cost) ÷ cost × 100
- Margin % = (price − cost) ÷ price × 100
- To hit a target margin: price = cost ÷ (1 − margin)
- To apply a markup: price = cost × (1 + markup)
Markup-to-margin conversion
| Markup | Equals margin |
|---|---|
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 33.3% | 25.0% |
| 50% | 33.3% |
| 100% | 50.0% |
What the mix-up costs on one patio
Take a patio that costs $6,405 to build (materials + burdened labor + overhead, from the patio pricing example). You want 25% profit:
- As a 25% markup (wrong): $6,405 × 1.25 = $8,006 — which is only a 20% margin.
- As a 25% margin (right): $6,405 ÷ 0.75 = $8,540.
That's $534 left on the table on one job, purely from using the wrong percentage — repeated across a season, it's real money. Bankers and estimators quote in margin for exactly this reason: it can't drift above 100%, and it answers the question that matters — how much of what the customer pays you actually keep.
Let the tool show both
The free hardscape bid calculator prices every job at your target margin and shows the equivalent markup right beside it, so you can never accidentally swap one for the other again.