Markup and margin on a job's price

Enter your cost for the job and the markup you add to it. The calculator shows the price, the profit in dollars, and the margin, which is that profit as a share of the price.

Where to find your numbers

• Your cost. Enter everything the job costs you: materials, your crew's labor, subcontractors, permits, equipment rental and disposal. If you want each job to carry part of the business's running costs, such as insurance, the truck and the phone, add that share here too.
• Markup. Enter the percentage you add on top of your cost.

What the figures mean

Price is your cost plus the markup. Profit is the markup in dollars, what's left of the price after the cost. Margin is the profit divided by the price.

A 25 percent markup gives a 20 percent margin, and a 50 percent markup gives a margin of about 33 percent. The gap widens as the markup grows.

Markup and margin describe the same profit against two different bases. Markup is measured against your cost, and margin against the price the client pays. Because the price is always larger than the cost, the margin always reads lower than the markup. So a markup and a margin with the same number give two different prices.

If you price to a target margin, enter your cost, then try markups until the margin reads the figure you want. The markup that gets you there is the one to add to the estimate.

Covering the whole business

Fixed costs are the ones that stay the same however much work you do in a month, such as insurance, the truck and the phone. Your break-even point is where a month's revenue equals its total costs, with nothing gained or lost. When you work it out, add a cushion of about 10 percent for costs you can't predict.

If the running costs aren't in your cost line, the profit on each job has to cover them before anything is left for you. Adding up a month of fixed costs shows how much profit the month's jobs need to bring in.

What it leaves out

Sales tax, payment processing fees, and income tax on the profit aren't in the calculator. Neither is the time spent estimating jobs you don't win, or a callback to fix something after the job is closed. If the price is fixed and the job runs over, the overrun comes out of the profit.