What Markup Gives a 5 Percent Margin?
Markup, against cost
5.3%
To keep 5 percent of the price, add 5.3 percent to a $10,000 cost: $10,526.32.
How that number is worked out
These are the figures this page was built with and every line the calculator produces from them. Change anything above and all of it moves.
- Your cost for the job10000 $
- I want to setMargin percent
- That number5 % or $
Price to charge$10,526.32
| Your cost | $10,000.00 |
|---|---|
| Price | $10,526.32 |
| Gross profit | $526.32 |
| Markup, against cost | 5.3% |
| Margin, against price | 5%this is the one your accountant means |
| If you want this margin | Mark up cost by | On $10,000 cost, charge |
|---|---|---|
| 10% | 11.1% | $11,111.11 |
| 15% | 17.6% | $11,764.71 |
| 20% | 25% | $12,500.00 |
| 25% | 33.3% | $13,333.33 |
| 30% | 42.9% | $14,285.71 |
| 35% | 53.8% | $15,384.62 |
| 40% | 66.7% | $16,666.67 |
| 50% | 100% | $20,000.00 |
Margin compared
Going the other way, the required markup climbs much faster than the margin does.
| Margin | Price to charge | Markup, against cost |
|---|---|---|
| 10% margin | $11,111.11 | 11.1% |
| 20% margin | $12,500.00 | 25% |
| 30% margin | $14,285.71 | 42.9% |
| 40% margin | $16,666.67 | 66.7% |
| 50% margin | $20,000.00 | 100% |
What else matters here
Five percent margin needs 5.3 percent added to cost, and at this end of the scale the two numbers are so close that the conversion barely matters. What matters is what five percent does to you when a job goes wrong.
Work it backwards. A job that loses $2,000, which is one bad week of labor or one wrong order, has to be recovered out of gross profit at five cents on the dollar. That means $40,000 of additional revenue, or nearly four more jobs the size of this one, purely to get back to where you started.
That is the whole argument against thin margins, and it has nothing to do with greed. A thin margin is a business with no shock absorber, where every ordinary mistake becomes a month of unpaid work. The percentage you need is not a matter of ambition, it is a matter of how often things go wrong, and in construction they go wrong regularly.
What this calculator assumes
- Markup is measured against your cost. Margin is measured against the price. They are never the same number and confusing them is the most expensive arithmetic mistake in the trades.
- A 50 percent markup is a 33.3 percent margin. To actually keep 50 percent of the price you have to mark up by 100 percent.
Questions people ask
What markup gives a 5 percent margin?
5.3 percent. On a $10,000 cost that is a price of $10,526.32 and $526.32 of gross profit.
How much revenue does a $2,000 loss cost me at a 5 percent margin?
$40,000, which is nearly four more jobs this size, just to get back to where you started.
Why are thin margins dangerous?
Because there is no shock absorber. At five percent, every ordinary mistake turns into weeks of unpaid work, and in construction ordinary mistakes happen regularly.
The markup vs margin calculator takes any dimensions you like and hands back the same list.