What is the difference between margin and markup?

Margin is profit as a percentage of the selling price (profit/selling price). Markup is profit as a percentage of the cost price (profit/cost). A 50% markup gives a 33.3% margin. A 100% markup gives a 50% margin. They are different ways of expressing the same profit.

What profit margin should tradespeople aim for?

Gross profit margins of 25-45% are typical for trade businesses. Net margins (after all overheads) of 10-20% indicate a healthy business. Below 10% net margin leaves little room for slow periods or unexpected costs.

How do I convert markup to margin?

Margin = Markup / (1 + Markup). For example, a 25% markup: 0.25 / 1.25 = 20% margin. Conversely, Markup = Margin / (1 - Margin). A 20% margin: 0.20 / 0.80 = 25% markup.

Should I base pricing on margin or markup?

Either works, but be consistent. Margin is more useful for financial reporting as it shows profit as a share of revenue. Markup is often easier when pricing jobs as you simply add a percentage to your costs.

What overheads should I account for in net margin?

Include: vehicle costs, insurance, tools, admin time, phone/broadband, marketing, accountancy, training. These are the costs that eat into your gross profit. A job with 30% gross margin might only yield 15% net margin after overheads.

TradeCalculator.co.uk

Profit Margin Calculator

Convert between margin, markup, and profit for any job

Calculation Mode

Cost Price

Selling Price

How We Calculate This

Enter your cost and selling price (or target margin/markup) and the calculator computes the profit, margin percentage, and markup percentage. Margin = Profit / Selling Price. Markup = Profit / Cost Price. You can also factor in overhead percentage to see your true net profit and net margin after business costs.