Markup vs. Margin
What is Markup vs. Margin?
Markup and margin both describe the gap between what a job costs and what you charge, but they divide that gap by different bases — which is why the same dollar of profit produces two different percentages. Markup is figured on cost: markup = (price − cost) ÷ cost. Margin is figured on price: margin = (price − cost) ÷ price. Because price is always larger than cost, the margin percentage is always smaller than the markup percentage for the same job. The two convert exactly: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). Confusing them quietly underprices work.
The mistake is simple and expensive: you decide you want to keep a certain margin, then apply that same number as a markup on cost. Because markup divides by the smaller number (cost) and margin divides by the larger one (price), the markup needed to hit a given margin is always the higher figure. Treat them as interchangeable and every quote lands under the margin you intended.
In practice you mark parts and materials up from what you paid, but you should think in margin when you judge whether the business is healthy, because margin maps directly onto revenue. The two are not rivals; they are the same profit viewed from cost versus from price. The only discipline required is to be explicit about which base you are using and to convert deliberately rather than by feel.
When you need to move between the two without arithmetic errors, the markup-vs-margin converter does the exact conversion in both directions.