LoadingLoadingLoadingLoadingThe single most common pricing mistake is adding a markup and assuming it gives you the same margin. It doesn't. Enter a cost and one percentage, get all four numbers — selling price, profit, margin and markup.
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Markup is profit as a percentage of cost. Margin is profit as a percentage of price. A 30% markup is only a 23% margin — by the tenth quote, the gap is real money.
Selling price
£130.00
Profit
£30.00
Margin
23,08%
Profit as a percentage of the price the customer pays.
Markup
30,00%
Profit as a percentage of what it cost you.
Gross margin only — does not account for overhead allocation, VAT, finance costs or commission.
Most quoting software lets you set a markup percentage on materials and labour. Most owners think in terms of margin — what's the profit on the job. The two are different ratios on different denominators, and the gap grows fast as the percentage goes up.
A 30% markup is a 23% margin. A 50% markup is a 33% margin. A 100% markup (doubling the cost) is a 50% margin. If you add a 25% markup thinking you've made 25% profit, you've actually made 20% — and on a busy year, that's the difference between a healthy business and a survivable one.
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