A 25% markup is a 20% margin. Mix the two up and every job you price comes in a few points light. Type in any one number and the rest fill in.
Change your cost and the price follows your markup. Change the markup, margin or price and the other two follow.
Most remodel estimates add overhead to the job cost, then profit on top of that. Adding the two percentages together doesn't give you your margin.
| Markup on cost | Margin on price | $10,000 cost becomes |
|---|
Markup is what you add on top of your cost, as a percentage of the cost. Margin is the part of the price you keep, as a percentage of the price. Same dollars, different thing you're dividing by.
A $10,000 job priced at $12,500: you added $2,500. That's 25% of the cost (markup) but only 20% of the price (margin). If you meant to keep 25% and marked up 25%, you're short $833 on that job.
The average remodeler kept 6.3% as net profit in 2024, according to NAHB's Remodelers' Cost of Doing Business Study. On numbers that thin, pricing a whole year at a 20% margin when you meant 25% is the difference between a good year and a break-even one — and it never shows up on any single job, because every job is off by the same few points.
Markup is what you add on top of your cost, as a percentage of the cost. Margin is the part of the price you keep, as a percentage of the price. Same dollars, different denominators: a $10,000 job priced at $12,500 has a 25% markup and a 20% margin.
Margin = markup ÷ (1 + markup). A 25% markup is 0.25 ÷ 1.25 = 20% margin. A 50% markup is a 33.3% margin.
Markup = margin ÷ (1 − margin). To keep a 20% margin you need a 25% markup; to keep 30% you need about 42.9%.
No. With overhead at 10% of cost and profit at 15% of cost plus overhead, the price is 1.265 times your cost: a 26.5% markup and about a 20.9% margin. Adding the two percentages together overstates what you keep.
Remodelr sets your overhead, profit and deposit once and applies them to every estimate, change order and draw — and shows what each job actually made.
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