Worked example: the same profit, two percentages
A delivery cost of 15,000 and a quote of 20,000 leave 5,000 gross profit. Divide by 20,000 to get a 25% margin. Divide by 15,000 to get a 33.3% markup. A 25% markup would instead produce a price of 18,750 and a margin of 20%.
Choose the cost basis before the percentage
For an internal project decision, use a consistent delivery-cost definition: loaded labor, subcontractors, expenses and any overhead you allocate to the job. Including a cost in both your hourly rate and a separate overhead line counts it twice. This tool does not classify costs for financial reporting or calculate tax.
A margin target does not remove cost uncertainty
The result is exact arithmetic for the cost you enter. If 15,000 is only the most likely outcome, the displayed 25% is conditional on that outcome. Use the confidence-based bid-price calculator when you have a cost range, and read the worked margin-versus-markup guide before using the percentages in a proposal.
Frequently asked questions
How do I convert markup to margin?
For markup as a decimal, margin = markup / (1 + markup). A 25% markup gives 0.25 / 1.25 = 20% margin.
Why is markup not defined when cost is zero?
Markup divides profit by cost. With a zero cost that division is not defined, even though gross margin on a positive selling price is 100%.