What the result means
Markup tells you how much you added on top of your cost. Margin tells you how much of the sell price you keep. Both come from the same dollars of profit, so the calculator shows them side by side with the price and profit for every mode.
If the price is below your cost, the result shows the loss in dollars and a negative markup and margin. The margin here is gross margin on the item or job you entered; overhead, labor you did not include and other costs still come out of it.
The markup mistake that costs shops money
Markup and margin are both percents of the same profit, measured against different numbers. Markup divides the profit by your cost. Margin divides it by the sell price. When you make money the price is bigger than the cost, so the margin percent is always smaller than the markup percent.
Here is how that plays out on a service call. A part costs you $200. You want to keep 50% of what you charge, so you add a 50% markup and quote $300. Your profit is $100, and $100 out of $300 is a 33.33% margin, not 50%. To keep half, the price has to be $400, which is a 100% markup on the $200 part.
The gap grows as the percent grows. Check the markup-to-margin table on this page before you set markup rules, and use the cost + margin mode when you know what you want to keep.
When to think in markup and when to think in margin
Think in markup when you price parts and materials. You know what the part cost you, and markup turns that cost into a sell price in one step: cost × (1 + markup ÷ 100). A parts multiplier is the same idea written differently: a 2.0× multiplier is a 100% markup.
Think in margin when you look at what the business keeps. Overhead, owner pay and profit all come out of the sell price, so a goal like keeping half of every sale is a margin goal. The labor rate calculator works the same way: it divides your costs by one minus your target margin.
Set the goal in margin, then convert it to the markup you apply to cost. The cost + margin mode does that conversion for you, using markup = margin ÷ (100 − margin) × 100.
How it's calculated
- Price = cost × (1 + markup ÷ 100)
- Markup % = (price − cost) ÷ cost × 100
- Margin % = (price − cost) ÷ price × 100
- Price for a target margin = cost ÷ (1 − margin ÷ 100)
- Markup for a target margin = margin ÷ (100 − margin) × 100
Money is worked in whole cents and the price is rounded once, to the nearest cent. Percents are shown to two decimals.
Cost must be more than $0, and a target margin must be below 100%.
Worked example
Sample numbers: a replacement part on a service call costs you $200, and you want to keep half of what you charge for it.
- 50% markup: $200 × 1.50 = $300, so profit = $100
- Margin = $100 ÷ $300 × 100 = 33.33%
- For a 50% margin: $200 ÷ (1 − 0.50) = $400, a 100% markup
A 50% markup keeps 33.33% of the price, not 50%. Keeping half takes a 100% markup. Sample numbers. Use your own costs.
Reference table
The values below are computed from the same calculator functions used above. They let you compare common sizes and operating points without replacing the interactive calculation or its assumptions.
| Markup | Margin | Multiplier |
|---|---|---|
| 10% | 9.09% | 1.10× |
| 15% | 13.04% | 1.15× |
| 20% | 16.67% | 1.20× |
| 25% | 20.00% | 1.25× |
| 30% | 23.08% | 1.30× |
| 33⅓% | 25.00% | 1.33× |
| 40% | 28.57% | 1.40× |
| 50% | 33.33% | 1.50× |
| 60% | 37.50% | 1.60× |
| 75% | 42.86% | 1.75× |
| 100% | 50.00% | 2.00× |
| 150% | 60.00% | 2.50× |
| 200% | 66.67% | 3.00× |
Margin = markup ÷ (100 + markup) × 100. Multiplier = 1 + markup ÷ 100. Every row is calculated by the same function as the calculator above.
Sources and assumptions
Money is worked in whole cents and the price is rounded once, to the nearest cent. Percents are shown to two decimals. Cost must be more than $0, and a target margin must be below 100%. The formulas are published so you can check a result by hand instead of treating it as a black box.
Last reviewed . Spot an error? Email support@tiermenu.com.
FAQ
What is the difference between markup and margin?
Markup is profit divided by your cost. Margin is profit divided by the sell price. When you make a profit, the markup percent is always higher than the margin percent on the same sale.
How do I convert markup to margin?
Margin = markup ÷ (100 + markup) × 100. A 50% markup is a 33.33% margin and a 100% markup is a 50% margin. The table on this page lists common values.
How do I convert margin to markup?
Markup = margin ÷ (100 − margin) × 100. A 40% margin needs a 66.67% markup, and a 50% margin needs a 100% markup.
Why can't I enter a margin of 100% or more?
Margin is the share of the price you keep. At 100% the whole price would be profit, which only happens if the cost is zero, and more than 100% is not possible. Enter a margin below 100%.
What if my price is below my cost?
Use the cost + price mode. The calculator shows the loss in dollars and a negative markup and margin, so you can see how far below cost the price is.
How does a parts multiplier relate to markup?
Multiplier = 1 + markup ÷ 100. A 2.0× multiplier is a 100% markup and a 2.5× multiplier is a 150% markup. The flat rate price calculator takes a multiplier if that is how you price parts.
Using the result in your prices
The result is only as good as the costs you enter. Use what you actually pay for parts, your burdened labor cost and your real overhead, not the sample inputs.
Round the final price, not the inputs. If you round a price to a clean number, check the markup or margin again after rounding so you know what you are really keeping.
Rerun the numbers when your costs change: a supplier price increase, a wage or insurance change, a new hire or a new year's overhead budget. Then compare the result with the prices you charge now.
TierMenu provides these free calculators without an email gate. The results stay in this browser unless you choose to copy a shareable URL or print the page. A shared URL includes the calculator inputs in its query string; do not put personal or sensitive information in calculator fields.
In TierMenu, the price book applies your markup rules to the parts on every task, so each price starts from your own costs. See how the price book works.