I'm an electrical contractor. For years I priced jobs the way a lot of us do: take my costs, add a percentage that "felt right," send the bid. I thought a 35% markup meant 35 cents of every dollar was mine. It doesn't. Not even close. The day I actually did the math, I realized I'd been leaving real money on the table on every job — not because I was working cheap, but because I was using the wrong number.
Two numbers, two different jobs
Markup and margin both describe the gap between what a job costs you and what you charge. The difference is what they're measured against.
- Markup is measured against your cost. "I added 35% on top of what it cost me."
- Margin is measured against your price. "35% of what the customer paid is profit."
Same dollars of profit. Different denominator. And because the price is always bigger than the cost, the margin percentage is always smaller than the markup percentage. That gap is where the confusion — and the lost money — lives.
The math, on a real job
Say a job costs you $10,000 in labor, materials, and subs, and you mark it up 35%:
- Price = $10,000 × 1.35 = $13,500
- Profit = $13,500 − $10,000 = $3,500
- Margin = $3,500 ÷ $13,500 = 25.9%
You charged a 35% markup. You kept a 25.9% margin. If you were counting on 35% in your pocket, you're 9 points short — on every job.
On a $13,500 job that's not life-or-death. Run a few hundred thousand a year that way and the gap is a new truck.
The conversion that should live in your truck
Here's what common markups actually leave you as margin. The formula is simple: margin = markup ÷ (1 + markup).
- 15% markup → 13.0% margin
- 20% markup → 16.7% margin
- 25% markup → 20.0% margin
- 35% markup → 25.9% margin
- 50% markup → 33.3% margin
- 100% markup → 50.0% margin
Notice you have to double your cost just to keep half. That surprises almost everybody the first time.
Price for the margin you actually want
Most contractors should think in margin, because margin is what's left to cover the things a job-cost number forgets — slow seasons, warranty callbacks, the truck that needs tires, your own time off. So flip the formula. To hit a target margin, the markup you need is: markup = margin ÷ (1 − margin).
- Want a 20% margin? Mark up 25%.
- Want a 30% margin? Mark up 42.9%.
- Want a 40% margin? Mark up 66.7%.
Why this gets worse on paper
Getting the percentage right is only half the battle. The other half is knowing your true cost in the first place — and that's where paper quietly sinks you. The extra hour the crew didn't write down, the second trip to the supply house, the material you ate on a change you never wrote up: every one of those raises your real cost without raising your price. So even a contractor who prices a healthy margin watches it leak away, job by job, and doesn't find out until the bookkeeper closes the month.
A right markup on a wrong cost is still a wrong price.
That's the whole reason I built JobGantry. Time, materials, POs, and change orders all post against the job as they happen, so your cost is live and your margin is real — not a guess you reconcile six weeks later. Price it right up front with the calculator, then protect it while the job runs.
The one-minute version
- Markup is on cost. Margin is on price. Margin is always the smaller number.
- A 35% markup is a 25.9% margin. Stop treating them as the same.
- Decide the margin you need, then back into the markup that gets you there.
- Keep your real costs tight, or the best pricing in the world still leaks.