Construction Markup and Profit Margin Calculator

Markup and margin are not the same thing

The most common mistake in construction bids is to confuse these two.

• Markup (on cost): profit / cost. It shows how much you add on top of cost.
• Margin (on price): profit / selling price. It shows how much of the money you receive is profit.

Adding 25 percent to cost gives a 20 percent margin on price. If you want a 20 percent margin you must add 25 percent to cost, not 20. The two are related by m = k / (1 + k) and k = m / (1 − m).

Order of calculation

Overhead is added to direct cost: M = C × (1 + g). Working from markup, S = M × (1 + k). Working from a target margin, S = M / (1 − m). The third tab goes the other way: from a known price and cost it finds profit, margin and markup.

Example

A job with a direct cost of 1,000,000 and 10 percent overhead has a total cost of 1,100,000. A 20 percent markup gives a price of 1,320,000, a profit of 220,000 and a margin of 16.67 percent. For a 20 percent margin on the same job the price must be 1,375,000.

Cost per square metre

If you enter the floor area, the tool divides total cost and selling price by it. The figure is handy for comparing projects, but watch how basements, parking and common areas are counted in the area.

Limits

Amounts exclude tax. Tax and deduction rates depend on legislation and the contract, and this tool does not calculate them. The result is a preliminary estimate.