Client price, profit and tax with the margin or markup basis stated every time.
Programme, labour and cash flow. 5 questions answered below, each with the arithmetic behind it and the limits of what the tool decides. Open the Margin and Markup Calculator tool.
Margin and markup are different numbers computed from different bases, and confusing them is the most common way a profitable job is priced at a loss. Markup is a percentage of cost. Margin is a percentage of the selling price. A twenty percent markup is a sixteen point seven percent margin, and the gap widens as the numbers rise. The calculator does both, on the base you choose, and shows the selling price, the profit and the resulting margin together. Where a target margin is set it works backwards to the price, which is the direction most pricing decisions actually travel. Tax stays outside the arithmetic unless a configured rule applies, and it is reported as its own line when it does.
A job costing a hundred thousand, priced at a twenty percent markup, sells at a hundred and twenty thousand and carries a margin of sixteen point seven percent. To achieve a twenty percent margin instead, the price is a hundred and twenty five thousand, because the profit has to be a fifth of the price rather than a fifth of the cost. Five thousand of difference on one job, and on a year of jobs it is the difference between a business that grows and one that works for its clients without ever quite getting ahead.
Markup is a percentage added to cost. Margin is a percentage of the selling price. On a cost of a hundred, a twenty percent markup gives a price of a hundred and twenty and a margin of sixteen point seven percent, because the profit is twenty on a price of a hundred and twenty. The calculator shows both from one input, so the number being quoted is unambiguous.
Because the two bases produce different prices from the same intention. A contractor who says they want twenty percent and applies it as markup is pricing at sixteen point seven percent of the price, which may be below the margin the business needs once overheads are recovered. Getting the basis wrong on a large job moves the price by thousands, and it is invisible unless both figures are shown.
No. Tax is reported as its own line where a rule applies to your market, and as undetermined where none does. Folding an assumed percentage into a selling price produces a figure that looks final, is wrong for the jurisdiction and is very hard to unpick once quoted. Where you need to show tax, add the rate that applies to you and it is carried as your figure.
Yes. Enter a target margin and the calculator returns the price that achieves it, which is the direction most pricing decisions actually take. It is the same arithmetic rearranged, and it is more useful than forward pricing when a business knows the margin it needs to survive and is deciding whether a job is worth taking at all.
Overheads are kept separate from profit. Recovery is a different calculation, usually a rate per unit of turnover or per project, and mixing it into a margin hides whether the business is covering its fixed costs. The calculator shows cost, overhead recovery, profit and price as distinct lines, so a job that looks profitable at the margin line can still be seen to be thin once overheads are counted.