Contractor Markup Calculator: Typical Markups and Markup vs. Margin

A 25% contractor markup gives only a 20% margin, and to earn a 30% margin you need a markup of about 42.9%. Contractor markup is the percentage you add on top of a job’s cost to get the price; margin is the share of the price that is left after cost. Use the calculator below to convert one into the other and to find the price a job needs for the margin you want.

Contractor markup calculator

Markup vs. margin: the difference that costs contractors money

Both numbers use the same gross profit (price minus cost). What changes is what you divide it by.

• Markup = gross profit ÷ cost. It answers “how much did I add on top?”
• Margin = gross profit ÷ price. It answers “how much of every dollar I bill do I keep before overhead?”

The usual mistake is to want a 25% margin and add 25% to cost. On a $10,000 job, a 25% markup gives a $12,500 price and $2,500 of gross profit. That is a 20% margin, not 25%. To keep 25% of the price you need a markup of 33.3%, which means a $13,333 price.

The conversion formulas are:

• Margin = markup ÷ (1 + markup)
• Markup = margin ÷ (1 − margin)
• Price for a target margin = cost ÷ (1 − margin)

Markup to margin conversion table

What is a typical contractor markup?

There is no official “standard” markup. It depends on the trade, job size, how much of the work is subcontracted and, above all, your overhead. The most useful public data comes from contractors’ actual books. NAHB’s 2026 Remodelers’ Cost of Doing Business Study, which covers 2024, reports:

NAHB notes that the 6.3% net margin was the highest since 1996. Converting that gross margin into markup (our calculation, not an NAHB figure): a 29.9% gross margin on a 70.1% cost of sales is a markup of about 42.7% on direct costs (29.9 ÷ 70.1). In other words, the average remodeler in the study priced jobs at roughly 1.43 times their direct cost, and most of that went to overhead, not profit.

That is the real lesson for small contractors. Markup has to pay for overhead first. In the NAHB numbers, overhead took 23.6 cents of every dollar and net profit was 6.3 cents. A contractor who marks up 20% (a 16.7% margin) with overhead like that loses money on every job, however busy the schedule looks.

How to choose your markup

Work backward from your own numbers instead of copying a rule of thumb:

1. Find your overhead as a share of revenue. Take last year’s overhead (office, insurance, vehicles not charged to jobs, software, marketing, your own salary if it is not in job costs) and divide it by revenue.
2. Pick a net profit target. It is the share you want left after overhead.
3. Add them to get your target gross margin. Overhead 18% + profit 10% = a 28% gross margin.
4. Convert to markup. 0.28 ÷ (1 − 0.28) = 38.9% markup on direct cost.
5. Check the result against real jobs. If the price is uncompetitive, overhead or job costs are the problem, not the formula.

The calculator’s “work backward” field does steps 4 and 5 for you.

Markup on materials, labor and subcontractors

Some contractors use one markup for everything. Others use different markups for materials, their own labor and subcontracted work, because each carries different risk and handling cost. That’s fine as long as the blended result still reaches your target gross margin. Two checks:

• Total the job both ways. Add each line with its own markup, then compare the total gross profit with the margin you need.
• Watch pass-through costs. Permits, equipment rental and large subcontracts can be a big part of the cost. A low markup on them pulls the whole job’s margin down.

Your job cost has to be complete before any markup makes sense. If labor hours, travel or small materials are missing, the markup is applied to the wrong base. For estimating tools, see our guide to contractor cost estimating software, and to check after the job whether the estimate held, see job costing software for service businesses. For a single service visit, the job cost calculator breaks cost into labor, travel, materials, overhead and payment fees.

Frequently asked questions

What is the difference between markup and margin? Markup is gross profit divided by cost; margin is gross profit divided by price. The same job always has a higher markup than margin: a 50% markup is a 33.3% margin.

What markup do I need for a 20% margin? 25%. Divide the margin by one minus the margin: 0.20 ÷ 0.80 = 0.25.

What is a typical general contractor markup? There is no official standard. NAHB’s 2026 study shows remodelers averaged a 29.9% gross margin in 2024, which works out to about a 42.7% markup on direct costs, but your overhead decides what you need.

Should I mark up materials and labor differently? You can, as long as the blended gross margin across the whole job still covers your overhead and profit target. Check the total, not just each line.

Is markup the same as profit? No. Markup produces gross profit, which must first pay overhead such as insurance, vehicles, office costs and your own salary. Net profit is what is left after that.