Markup vs Margin Calculator

Markup vs Margin: The Plain-English Difference

Confusing markup and margin is one of the most common reasons why sole trader builders, plumbers, and electricians lose money on materials. While both terms describe the relationship between your purchase price and your selling price, they measure different financial realities.

**Markup** is the percentage you add to your cost price to determine the customer's price. **Margin** is the percentage of the final selling price that represents profit. The critical difference lies in the math: markup is calculated relative to *cost*, while margin is calculated relative to *selling price*.

A Worked Example

Let's look at a concrete example using a cost of **£1,000.00** for a consumer unit and cabling:

• Applying 25% Markup:
  Cost × 1.25 = Client Price
  £1,000.00 × 1.25 = **£1,250.00**
  Profit is **£250.00**.
  This is a 25% markup, but the profit margin is £250.00 ÷ £1,250.00 = **20% margin**.
• Confusing Margin with Markup:
  If you wanted a **20% margin** but mistakenly added a **20% markup**:
  £1,000.00 × 1.20 = **£1,200.00**
  Your profit is **£200.00**.
  Your resulting margin is actually £200.00 ÷ £1,200.00 = **16.6% margin**.
  By confusing markup and margin, **you just lost £50.00 in profit** on a single job!

Three Common Margin Mistakes

• Assuming Markup and Margin are Identical: As percentages increase, the gap between markup and margin widens. E.g. a 50% markup yields a 33% margin, while a 100% markup yields a 50% margin.
• Not factoring merchant delivery fees into cost: Your markup should be applied to the total landed cost of materials, including delivery, cutting charges, or hiring costs, not just the base price.
• Failing to track price updates: Merchant trade prices change constantly. If you quote using old pricing lists and don't update your costs, your profit margin will shrink.