Markup and margin are two views of the same profit
Every bid has a cost and a price, and the gap between them is profit. Markup and margin both describe that gap. They just divide it by different numbers. Markup divides profit by cost. Margin divides profit by price. A job that costs $1,000 and sells for $1,250 carries $250 of profit: a 25% markup and a 20% margin. Same job, same dollars, two percentages.
The trouble starts when one is used in place of the other. If you decide you want to keep 20% of every dollar you collect, and then multiply your costs by 1.20, you have priced a 20% markup. The profit is $200 on $1,200, which is about 16.7% of the price. The missing three points do not show up on the estimate. They show up at the end of the year.
How to price a bid from your costs
Add up what the job will cost you: materials, labor at its loaded rate, subcontractors, equipment, permits, and anything else you will pay for. That subtotal is the break-even price. Selling at that number covers the job and leaves nothing.
If you think in margin, divide the cost by one minus the margin. A 20% margin divides by 0.80, a 30% margin divides by 0.70. If you think in markup, multiply the cost by one plus the markup. The calculator does either and shows the other number next to it, so you can check that the percentage you used means what you think it means.
Overhead belongs somewhere in this picture. Either it is already inside your labor rate, or the margin has to be large enough to pay for it before any profit is left. The overhead hourly rate calculator spreads your monthly overhead across billable hours so you can put it into the labor line instead of guessing at it in the percentage.
Converting between markup and margin
Margin = markup ÷ (1 + markup). Markup = margin ÷ (1 − margin). Work with decimals: a 50% markup is 0.5 ÷ 1.5, a 33.3% margin. A 50% margin needs a 100% markup. As margin approaches 100%, the markup needed grows without limit, which is why the calculator refuses a margin of 100% or more.
A short way to remember it: margin can never reach 100%, because profit can never be the whole price while the job still costs something. Markup can be any size you can get a customer to accept.
Using the trade presets and the bid summary
The trade presets rename the cost lines to fit roofing, electrical, plumbing, HVAC, remodeling, or general contracting work. Presets change line names only. The example costs are the same for every trade and are illustrative only. They are not typical job costs and they do not come from a survey. Replace them with your own takeoff.
Each line's selling price is its cost scaled by the same factor as the whole job, so the lines add up to the total. Fill in the project and client, then use Print / PDF. The printed bid summary shows the lines at selling price and the total. Tick the internal-copy box if you want cost, profit, markup, and margin on the printout for your own file. When you are pricing a single visit rather than a whole job, the service call fee calculator builds the fee from drive time, diagnosis, and miles instead.