Markup is not margin, and the difference is costing you more than you think
Most owners can tell you their markup off the top of their head. Far fewer can tell you their margin, and a surprising number assume the two are the same figure. They are not, and the confusion is quietly expensive.
Here is the arithmetic, because this is one of those problems that lives entirely in the numbers.
Take a job that costs you $100 to deliver. Apply a 25% markup and you invoice $125. The profit on that job is $25. But your margin is measured against the sale price, not the cost, so $25 on $125 is a 20% margin. Not 25%.
If you genuinely want to keep 25% of the sale price, you need to mark the cost up by roughly 33%, not 25%. The bigger the percentage, the wider the gap between the two. At a 50% markup, your margin is only 33%.
Why it matters
On a single job, this is a rounding error and nobody loses sleep over it. The problem is that quoting is not a single event. It is a system that runs hundreds of times a year, often through estimators working at pace, often using templates that were set up by someone who has long since left.
If that system is built on markup but the business is being judged on margin, every quote carries a small, invisible shortfall. Multiply it across a year of work and you arrive at the conversation that finance teams know well: a busy year, a full programme, and a result that landed lower than anyone expected.
The margin didn't leak during delivery. It was missing from the price before the job started.
What good looks like
The fix is not a bigger markup applied nervously. It's pricing to a target margin deliberately:
Quote from the margin you want to keep, then work backwards to the price, rather than starting with cost and adding a percentage.
Check that your quoting templates calculate on margin, not markup. Many don't, and nobody has looked in years.
Make sure whoever prepares quotes understands the difference. An estimator who thinks 25% markup delivers 25% margin will underprice every job they touch, in good faith.
None of this requires new software or a restructure. It requires knowing which number you are actually managing. The price is what you charge. The margin is what survives. Confusing the two is one of the most common reasons a busy business isn't a profitable one.
