Tools · Estimating
Margin and markup,
converted both ways.
Enter your cost and whichever figure you already have, a margin, a markup or a price you have quoted, and the other three follow. Pure arithmetic on your own numbers, exclusive of GST. The reference that explains what margin is and how to set it sits one link away.
01 / The calculator
Work it out
Cost plus any one of the other three. Nothing is stored, nothing is sent anywhere, and every figure is yours.
What the work costs you, excluding GST. Materials, labour, subcontracts and the preliminaries you have allowed.
The share of the sell price you intend to keep. Your own figure, set as a business policy, not one we supply.
The position
Enter your cost and one of the three figures beside it. Whichever one you know, the other three follow.
02 / Reading the result
What the two percentages are telling you
The calculator returns four numbers because a pricing decision has four faces, and builders routinely hold two of them and assume the other two. The sell price is what the client pays before GST. The gross profit is the dollars between that price and your cost. The margin expresses those dollars against the price, and the markup expresses the same dollars against the cost.
The reason this matters is that the two percentages are used in different rooms. Your accountant, your bank and your management report speak in margin, because margin is what reads off a profit and loss. Your estimating software, your subbies and your own head speak in markup, because markup is what you add when you are pricing. A builder who applies 20% because the report wants 20% has just under-priced the job by a quarter of the intended profit, every time.
Gross profit is not take-home profit. It is what is left to cover the overhead your jobs do not carry directly, the office, the vehicles, the software, your own time on the business rather than in it. Whether the margin you chose is enough is a question about your overhead, and that reasoning lives in the margin and markup reference rather than in a calculator.
03 / On the job
Where the conversion actually gets used
- Setting up estimating software. A field asking for a percentage is ambiguous until you know whether the product treats it as a margin or a markup. Test it with a round cost, then enter the figure that produces the price you intended.
- Pricing a variation on site. The client asks what an extra will cost while you are standing in the frame. A markup is the number you can apply in your head; converting your margin policy into its markup equivalent once means you are not doing the harder arithmetic in front of a client.
- Checking a trade quote against an allowance. When a subbie quote lands above the allowance, the decision is whether to absorb it, re-quote or value-engineer, and that call needs the margin impact in dollars rather than a feeling. The quotes over allowance guide covers the decision itself.
- Auditing a finished job. Run the third mode with the actual cost and the contract sum, including approved variations. The gap between the margin you priced and the margin you earned is the most useful number your business produces, and it is exactly what profit fade describes when it opens up job after job.
04 / Common mistakes
Four ways this goes wrong
- Treating the two as interchangeable. The most common and the most expensive. At the rates residential builders use, mistaking a margin for a markup costs roughly a quarter of the intended profit on every job it touches.
- Calculating on GST-inclusive figures. GST is collected, not earned. Including it inflates both the price and the apparent profit, and the percentage that comes out cannot be compared to anything in your accounts.
- Applying margin to the estimate but not to the variations. Variations accumulate across a build. A run of them priced at cost quietly resets the margin the job was won at, and nothing on the claim shows it happening.
- Pricing off an estimate that is already optimistic. Margin applied to an understated cost produces a confident number that was never achievable. The percentage is only as sound as the cost underneath it, which is why the cost database matters more than the rate you apply on top of it.
05 / FAQ
Common questions.
They measure the same dollars against different bases. Markup is the percentage added to your cost, so it is measured against cost. Margin is the share of the sell price you keep, so it is measured against the price. A 25% markup on $100,000 gives a sell price of $125,000 and a margin of 20%. The same job priced at a 25% margin sells for $133,333, which is $8,333 more on one job. The gap widens as the percentage rises, which is why the confusion is expensive rather than academic. The concept is covered in full in the margin and markup reference.
Margin equals markup divided by one hundred plus the markup, expressed as a percentage. A 25% markup becomes 25 / 125, which is 20% margin. Going the other way, markup equals margin divided by one hundred less the margin: a 20% margin becomes 20 / 80, which is a 25% markup. The calculator on this page does both directions from whichever figure you already have, along with the sell price and the gross profit in dollars.
Twenty five per cent. The pattern is worth knowing by heart for the rates builders commonly use, because it is the arithmetic that gets done in a car park with a phone. A 10% margin needs an 11.11% markup, a 15% margin needs 17.65%, a 20% margin needs 25%, a 25% margin needs 33.33%, and a 30% margin needs 42.86%. Notice how quickly the two diverge. At a 20% markup you are actually earning a 16.67% margin, so a builder who thinks in markup and reports in margin is consistently earning less than they believe.
No, and it should not. Margin is calculated on GST-exclusive figures throughout, because GST is not yours. It is collected on the sale, offset against the GST you paid on your inputs, and remitted at BAS time. Running margin on GST-inclusive numbers inflates the apparent price and distorts the percentage. Enter cost excluding GST, read the sell price as excluding GST, and add GST at the rate that applies to your contract when you invoice. The GST treatment for your business is a question for your accountant against current ATO guidance.
Usually yes, and often the contract or the standard form dictates it. A variation is work you carry the same risk on, with more administration per dollar than the base contract, so pricing it at cost plus nothing is a quiet way to erode the margin the job was won at. Some builders deliberately apply a higher rate to variations to cover the disruption, others hold the contract rate for the relationship. Either is defensible; pricing them at no margin because they feel small is not. What matters is that the decision is a policy rather than an accident.
Almost always because it is applying your percentage as a markup while you are reading it as a margin, or the reverse. A field labelled simply "profit %" is ambiguous, and different products resolve that ambiguity differently. The test takes ten seconds: enter a cost of $100,000 and your percentage, and compare the sell price your software produces to the two figures this calculator gives. Whichever matches tells you which convention your software uses. Once you know, you can set the number that actually delivers the margin you intend.
That is what the third mode is for. Enter your cost and the sell price you quoted, and the calculator returns both percentages and the gross profit in dollars. It is the fastest audit of a job that felt tight, and it is worth running on a build that has just finished, using the actual cost rather than the estimated cost. The difference between the margin you priced and the margin you earned is the number that tells you whether your estimating is honest, which is the loop the cost database reference describes.
We will not put a number on this page, and you should be suspicious of any site that does. Margin is a business policy, not an industry constant. It has to cover your overhead, the risk profile of the work you take on, the reinvestment your business needs and the profit you are actually building for, and those differ between a custom home builder running four jobs and a volume builder running forty. Work it out from your own overhead and target profit, set it as policy, then use this calculator to convert it into whatever field your software asks for. The margin and markup reference walks through how that policy is set.
06 / Keep reading
The references behind this calculator
The knowledge nodes that explain the concept, the companion tools, and the parts of the platform that hold your rates for you.
Set the margin once, then watch every job report against it.
A calculator answers one question at a time. VIABUILD holds your margin policy inside the estimate, carries it into the budget and shows forecast margin moving as costs land, so the gap between priced and earned shows up while you can still act on it.