Banay OS™Margin and markup are not the same number
Both start with profit: the job price minus the job costs. The difference is what you divide by.
Markup is profit divided by your costs. It answers “how much did I add on top of what the job cost me?”
Margin is profit divided by the price. It answers “out of every dollar the customer paid, how much did I keep?”
Price $20,000 − costs $15,000 = profit $5,000
Markup: $5,000 ÷ $15,000 = 33.3%
Margin: $5,000 ÷ $20,000 = 25%
The common mistake
Many contractors decide they want 25% and add 25% to their costs. On $15,000 in costs that gives a price of $18,750 and $3,750 of profit. That is a 25% markup, but only a 20% margin, because the profit is measured against the larger price. On a year of jobs, that gap adds up.
To hit a margin, divide instead of multiply: costs ÷ (1 − target margin). For a 25% margin, $15,000 ÷ 0.75 = $20,000.
Why it matters
Overhead like insurance, trucks, tools and office time is usually paid out of margin, so quoting off markup can leave less than you planned to cover it. Know which number your estimates use, and check it against what the job really cost once it is done. Your costs can also change after you quote, so recheck the numbers when materials or labor move.
Banay OS shows a live, automated P&L for every job.*
*Open jobs show a preliminary P&L that updates each time you open it. It becomes official once the job’s final P&L is in.