Margin versus markup: protect the profit in your quote

Written by the Offertje editorial team. Examples are illustrations, not market-rate research. Reviewed 5 November 2026.

Margin and markup use the same difference between cost and selling price, but divide it by different amounts. Mixing them up can make a quote look more profitable than it is. First decide which costs your calculation includes and use amounts on a consistent tax basis.

One job, two percentages

Imagine a job with £400 of included costs and a selling price of £500, both excluding VAT. The difference is £100. Markup compares that difference with cost: £100 ÷ £400 × 100 = 25% markup. Margin compares it with the selling price: £100 ÷ £500 × 100 = 20% margin.

Neither figure is automatically your net profit. If the £400 only includes labour and materials, you may still need to cover premises, insurance, software, equipment and other overheads from the £100 contribution. State the cost basis before using the percentage to make a pricing decision.

Calculate the price for the percentage you want

To add a markup, multiply cost by one plus the markup as a decimal. With £400 of costs and a 25% markup, the price is £400 × 1.25 = £500. To achieve a 25% margin instead, divide cost by one minus the margin: £400 ÷ 0.75 = £533.33 after rounding to pennies.

A target margin of 100% cannot be achieved with a positive cost and a finite selling price. A calculator should reject that input rather than show an enormous or misleading answer. The margin and markup calculator keeps the two methods separate.

Check a discount before offering it

A 10% discount on the original £500 price reduces it to £450. If your £400 cost stays the same, the contribution falls from £100 to £50. That is a 50% reduction in contribution, even though the customer received only 10% off. The new margin is £50 ÷ £450 × 100, approximately 11.11%.

Use the discount calculator to check the new price, then revisit the margin with the same cost basis. If the result no longer supports the work, consider a smaller scope or a different delivery option rather than quietly absorbing the difference.

Put a checked price into the quote

Carry the chosen selling price into your quote and describe the included work. Recalculate if material quantities, job hours or other assumptions change. These example amounts illustrate the maths; they are not recommended prices for a trade or evidence of what competitors charge.