Construction Markup vs. Profit Margin: What Is the Difference?
Markup is profit as a percentage of cost, used to set your selling price. Margin is profit as a percentage of that selling price. The same profit dollar amount produces a higher markup % than margin %.
Why the two percentages are never equal
Markup divides profit by cost — a smaller number. Margin divides the same profit by selling price — a larger number, because selling price already includes that profit. Dividing by a smaller base always produces a bigger percentage, so markup % is always higher than margin % for the same job.
Quick conversion reference
| Target Margin | Required Markup |
|---|---|
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
A job costs $80,000. A 25% markup sets the price at $100,000 — but that only produces a 20% margin, not 25%. To actually hit a 25% margin, you would need to apply a 33.3% markup instead.
Frequently asked questions
Which one should I use when pricing a job?
Markup is what you apply to cost to set a price. Margin is what you check afterward to confirm the price actually delivers the profitability you want — use both, not one instead of the other.
Is a 50% markup the same as 50% margin?
No — a 50% markup on a $100,000 cost sets a $150,000 price, which is only a 33.3% margin. Confusing the two is one of the most common — and costly — pricing mistakes in construction.
Does industry standard margin vary by trade?
Yes. General contractors often target 8–15% net margin, while specialty trades and design-build firms may target higher margins to cover added design risk and overhead.
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Related guides
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