Margin and markup calculator

What is the difference between margin and markup?

Margin and markup both measure the profit on a quote, but they divide it by different numbers, so the same job gives two different percentages. Markup is profit divided by your cost: how much you added on top of what the job costs you. Margin is profit divided by the selling price: what share of the money the client pays you actually keep. Markup is always the larger of the two, and the gap widens as the percentage grows.

The two formulas:

Markup %  = (Selling price − Cost) ÷ Cost × 100
Margin %  = (Selling price − Cost) ÷ Selling price × 100

And to go the other way, from a target margin to the price you must quote:

Selling price = Cost ÷ (1 − Margin % ÷ 100)

A worked example in PKR

An electrician in Lahore prices the materials and labour for a shop fit-out at a cost of PKR 100,000. She quotes the client PKR 125,000. The profit is PKR 25,000. The markup is 25,000 ÷ 100,000 = 25%. The margin is 25,000 ÷ 125,000 = 20%. Same job, same rupees, two different percentages, and both are correct.

Now suppose she wants a 20% margin on a bigger job that costs PKR 400,000. Multiplying by 1.20 gives PKR 480,000, but that is a 20% markup, and the margin on it is only 80,000 ÷ 480,000 = 16.7%. The right calculation is 400,000 ÷ (1 − 0.20) = 400,000 ÷ 0.80 = PKR 500,000, which leaves PKR 100,000 profit, 20% of the price. On a job that size the difference is PKR 20,000 of margin given away by confusing the two words.

Why does the confusion cost money?

Trade suppliers quote discounts and margins as markup, because that is how they price stock: cost plus a percentage. Accountants, lenders and most business advice talk in margin, because that is what the profit-and-loss statement shows. A contractor who hears “work on 30%” from a mentor and adds 30% to cost ends up with a 23% margin, and after overhead that can be close to nothing. The guide on how to calculate profit margin on quotes covers the full cost build-up, including overhead, and the typical net margin ranges for electrical, plumbing, solar and other trades.

Which number should go on the quote?

Neither. The client sees the selling price and the itemised lines; margin and markup are your private numbers. Work out the cost of every line first, decide the margin you need for that job (risk, cash flow, competition), use the formula above to set the price, and keep the cost column to yourself. The same arithmetic applies whether you quote in PKR, AED or any other currency.