Contractor resource
Gross margin vs markup for contractors
A worked example of the difference between margin, markup and selling price.
The same job, two percentages
- Example assumptions: direct cost $7,500; selling price $10,000.
- Gross profit = selling price − cost = $2,500.
- Gross margin = gross profit ÷ selling price = 25%.
- Markup = gross profit ÷ cost = 33.33%.
Price for a target margin
- For a target margin of 25%, price = cost ÷ (1 − 0.25).
- A $7,500 cost therefore requires a $10,000 selling price.
- Adding 25% markup gives a $9,375 price and only 20% margin.
- These examples exclude tax, overhead and other costs not entered. Include all relevant costs in your own pricing review.
Use the quote builder
- Enter material and labour costs and the client price.
- Review the displayed gross margin before sending.
- Use the pricebook for reusable items and recheck supplier prices on each quote.