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Markup vs margin calculator

Markup and margin are not the same number. Markup is calculated on what something cost you. Margin is calculated on what you sold it for. Add 20% markup to a £100 part and you sell at £120, but your margin is 16.7%, not 20%. To actually make a 20% margin you need 25% markup. Price a year of work on the wrong one and you are roughly a sixth short of the profit you think you are making.

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Markup is calculated on your cost. Margin is calculated on the sell price. They are never the same number.

Sell price
£120.00

Before VAT.

Gross profit
£20.00
Your actual margin
16.7%

Not 20%. Adding 20% markup gives you a 16.7% margin.

To truly make 20% margin
25.0% markup

Which means selling at £125.00 instead of £120.00.

The formula

Markup to margin

margin % = markup / (100 + markup) x 100

30% markup gives 23.1% margin.

Margin to markup

markup % = margin / (100 - margin) x 100

To make 30% margin you need 42.9% markup.

Conversion table

Worth printing and sticking in the van. Sell price assumes a £100 cost.

If you add this markup
MarkupYou actually makeSell price on £100
10% markup9.1% margin£110.00
15% markup13.0% margin£115.00
20% markup16.7% margin£120.00
25% markup20.0% margin£125.00
30% markup23.1% margin£130.00
40% markup28.6% margin£140.00
50% markup33.3% margin£150.00
60% markup37.5% margin£160.00
75% markup42.9% margin£175.00
100% markup50.0% margin£200.00
If you want this margin
Target marginMarkup you needSell price on £100
10% margin11.1% markup£111.11
15% margin17.6% markup£117.65
20% margin25.0% markup£125.00
25% margin33.3% markup£133.33
30% margin42.9% markup£142.86
33.3% margin49.9% markup£149.93
40% margin66.7% markup£166.67
50% margin100.0% markup£200.00

A worked example

You buy a boiler for £900. You add 20% markup, so you charge £1,080 and make £180. You think that is a 20% margin. It is 16.7%, because £180 is 16.7% of £1,080.

Do that on £120,000 of materials in a year and you take £20,040 gross profit rather than the £24,000 you planned for. The £3,960 gap is not a rounding error, it is most of a van payment.

To genuinely make 20% on that boiler you would charge £1,125, which is 25% markup.

Common questions

What is the difference between markup and margin?

Markup is worked out on what something cost you. Margin is worked out on what you sold it for. If a part costs you £100 and you add 20% markup you sell at £120, and your profit of £20 is 16.7% of that £120 sell price. So a 20% markup is a 16.7% margin. They are never the same number, and the gap gets wider the higher you go.

What markup do I need for a 20% margin?

25%. To make a 20% margin on a £100 cost you need to sell at £125, not £120. The formula is margin divided by (100 minus margin), so 20 / 80 = 0.25, which is 25% markup.

What markup should a tradesperson add to materials?

There is no single right answer and anyone quoting one is guessing. What matters is knowing which number you are using. A 20% markup on materials is common in the UK trades, but if you have priced a year of work believing that gives you a 20% margin, you have been making 16.7% and are roughly a sixth short of the profit you planned for.

Does this include VAT?

No. Work in figures excluding VAT throughout. VAT is not yours, it passes through to HMRC, so including it in a markup or margin calculation will flatter your numbers and give you a rate that does not cover your costs.

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