| Markup on cost | Gross margin | Benchmark |
|---|---|---|
| 10% | 9.1% | |
| 20% | 16.7% | |
| 25% | 20.0% | |
| 33.3% | 25.0% | |
| 43% | 30.0% | |
| 50% | 33.3% | |
| 67% | 40.0% | Healthy range |
| 82% | 45.0% | Healthy range |
| 100% | 50.0% | Healthy range |
| 122% | 55.0% | Healthy range |
IRONGRID's pricebook lets you set a cost price and sell price for every service and material, so markup is applied consistently on every job without manual calculation.
Why this distinction matters for contractor pricing
Many contractors set their prices by adding a percentage to their costs. The problem is that they call this percentage their margin, when it is actually their markup. The difference is not trivial.
The contractor thought they were making a 50% margin. They were actually making 33.3%. On $1M of annual revenue, that gap is roughly $167,000 in missing profit that was never there to begin with.
To achieve a 40% gross margin, which is the low end of the healthy range for most contractors, you need to charge a 66.7% markup on your direct costs, not 40%. Use the calculator above to find the markup that matches your target margin.
Frequently asked questions
What is the difference between markup and margin?
Markup is calculated on cost: a 50% markup means you add 50% of the job cost to arrive at your price. Margin is calculated on revenue: a 50% margin means 50 cents of every dollar billed is profit. They look similar but produce very different results. A 50% markup on a $10,000 job gives you a $15,000 price and a 33.3% margin, not 50%.
How do I convert markup to margin?
To convert markup to gross margin, use the formula: Margin = Markup / (100 + Markup) × 100. For example, a 50% markup gives a margin of 50 / 150 × 100 = 33.3%. A 100% markup gives a 50% margin.
How do I convert margin to markup?
To find the markup needed to achieve a target margin, use the formula: Markup = Margin / (100 − Margin) × 100. For example, to achieve a 40% gross margin, you need a markup of 40 / 60 × 100 = 66.7%. To achieve a 50% margin, you need a 100% markup.
Why do contractors confuse markup and margin?
Both are expressed as percentages, which makes it easy to assume they are the same. The key difference is the base: markup uses cost as the denominator, while margin uses revenue. Many contractors price jobs using markup thinking they are achieving a certain margin, then discover at year-end that their margins were lower than expected.
What markup do most contractors use?
Most healthy contracting businesses operate in the 40–55% gross margin range, which corresponds to a markup of roughly 67–122% on direct costs. The exact markup varies by trade, overhead structure, and market. Higher-overhead businesses need higher markup to reach the same net profit.