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/ CALCULATOR · 05
Margin vs Markup
Same profit in dollars — very different percentages. Getting these mixed up is the #1 reason tradies quote jobs that look profitable on paper but leave barely anything in the bank.
MARKUP
profit ÷ cost
How much you add on top of the cost to get your selling price. This is what most tradies quote on — "I add 25% to my materials".
Buy for $100. Add 25% markup = $125 sell.
Profit = $25. Margin = only 20%.
Profit = $25. Margin = only 20%.
MARGIN
profit ÷ sell price
How much of every dollar you invoice is actually profit. This is what your accountant — and your bank account — cares about.
Want a 25% margin on a $100 cost? Sell for $133.33.
Markup = 33.3%.
Markup = 33.3%.
I know my…
Cost (NZD)
Markup %
Ticket
Cost$1,000.00
Sell$1,300.00
Profit$300.00
Markup30.00%
Margin23.08%
Rule of thumb
A given markup always produces a lower margin. The bigger the percentage, the bigger the gap.
markup → margin
margin = markup ÷ (1 + markup)
markup = margin ÷ (1 − margin)
margin = markup ÷ (1 + markup)
markup = margin ÷ (1 − margin)
On the right — a cheat sheet. Print it, stick it in the van.
Markup %
Equivalent Margin %
10.00%
9.09%
15.00%
13.04%
20.00%
16.67%
25.00%
20.00%
33.33%
25.00%
50.00%
33.33%
66.67%
40.00%
100.00%
50.00%
150.00%
60.00%
200.00%
66.67%
Tip — when you're told "industry margin is 30%", that means 30% of the sell price is profit (so mark materials up by ~42.9%, not 30%). Always check which word was actually used.
By NZ Taxation Ltd
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