The Core Difference Between Margin and Markup
Marking up job costs by 30% does NOT yield a 30% gross profit margin. If direct costs are $10,000 and you add a 30% markup ($13,000 total), your actual margin is only 23.08% ($3,000 ÷ $13,000). That missing 7% often wipes out net profits after business overhead.
The Golden Contractor Margin Formula:
Quote Price = Total Direct Job Costs ÷ (1 - Desired Gross Margin)
Margin to Markup Reference Table
| Target Margin | Cost Multiplier | Equivalent Markup Needed |
|---|---|---|
| 25% Margin | ÷ 0.75 (x 1.33) |
33.3% Markup |
| 35% Margin | ÷ 0.65 (x 1.54) |
53.8% Markup |
| 45% Margin | ÷ 0.55 (x 1.82) |
81.8% Markup |
| 50% Margin | ÷ 0.50 (x 2.00) |
100.0% Markup (2x Cost) |
Setting Up Your Rate Card
- Go to Settings > Quotes & job defaults.
- Input your loaded labor rate (wage + payroll taxes + insurance + vehicle burden).
- Set your default material markup multiplier (e.g.
1.45for 45% markup on retail supplies). - Enable line-item margin alerts to flag any estimates falling below your target profitability threshold.