Here's a number that costs tradespeople real money every week: the gap between a 20% markup and a 20% margin. They sound the same. They are not. And if you think you're making 20% when you're actually making 16.7%, that difference is coming straight out of your pocket, job after job.
The 30-second difference
Both measure the same profit. They just divide it by different things:
- Markup is your profit as a percentage of what it cost you.
- Margin is your profit as a percentage of the price you charge.
Because the price is always bigger than the cost, dividing by the price gives a smaller number. So the margin is always lower than the markup for the same job. Take a $100 material with $20 of profit added:
Same twenty dollars. Two different percentages. The moment you say "I run 20%" without knowing which one you mean, your pricing is off by roughly a fifth of your profit.
Why "I add 20%" can mean you only keep 16%
Most tradespeople add markup - they take the supplier cost and pad it by a percentage, because that's the easy mental math at the counter. Nothing wrong with that. The problem starts when you later talk about that number as if it were margin, or set a profit target as a margin but hit it with a markup.
Say your accountant tells you to make 25% margin on materials to stay healthy. If you go add "25%" as a markup, you'll actually land at a 20% margin - short of the target on every single job. Over a year of materials, that shortfall is a serious number. The fix isn't to work harder; it's to convert correctly.
The conversion cheat sheet
Two formulas move you between the two, in either direction:
markup = margin ÷ (1 − margin)
So to actually keep a 25% margin, you add a 33.3% markup - not 25%. Here's the quick-reference table; the highlighted row is the one to memorize:
| If you add this markup | You keep this margin |
|---|---|
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 33.3% | 25.0% |
| 50% | 33.3% |
| 100% | 50.0% |
To hit a margin target, the markup you add is always the bigger number. If someone quotes you a percentage and it matters, ask which one they mean. "Twenty-five percent" is a 5-point swing in your profit depending on the answer.
How much to mark up materials in the trades
There's no single right number, but 15% to 35% markup covers most trade work. Where you land depends on how much the materials actually cost you beyond the sticker price:
- Higher markup (25–35%+) for materials that take real sourcing, handling, or carry waste and warranty risk - fittings, fixtures, consumables, anything you warranty if it fails.
- Lower markup (10–20%) for big-ticket items you're essentially passing straight through - a customer-selected appliance or a single expensive unit - where a full markup would balloon the quote for little added work.
Remember what the markup is paying for: your time sourcing and collecting, the cash you fronted, the warranty you carry, and the waste that never makes it into the finished job. It isn't padding. It's a real cost of handling materials on the customer's behalf.
Should you show the markup on the estimate?
You generally don't have to itemize it, and most trades don't. Two clean approaches:
- Bundle it. Show materials at your marked-up price as a single line, or roll them into a job total. Simple, and the customer sees one fair number.
- Separate labor and materials as two lines, materials already marked up. Transparent enough, without breaking out your margin for the customer to negotiate.
What you want to avoid is listing raw supplier receipts next to a separate "markup" line - that invites a fight over a number that's really just your cost of doing business.
Don't forget subs, rentals, and delivery
Materials aren't the only pass-through cost worth marking up. If you bring in a subcontractor, rent a machine, or pay for delivery, you're carrying the coordination, the risk, and the cash-flow on all of it - so a markup there is just as legitimate as on a box of fittings. Marking up subs is standard practice; you're responsible for their work to your customer, and that responsibility has value.
Set your markup once - keep the right margin every time
In TradeReady you set your materials markup, and it's applied automatically to every job you price, so the margin you meant to make is the margin you actually keep - no counter math, no conversion mistakes.
Free to download · 2-week free trialThe bottom line
Markup is measured against your cost; margin is measured against your price; the margin is always the smaller number. Pick your profit target as a margin, then use markup = margin ÷ (1 − margin) to find the markup that actually gets you there. Get this one relationship right and you stop leaving a fifth of your materials profit on the table without ever noticing.