They are not the same number
Markup is measured against your cost. Margin is measured against your price. A job that costs $10,000 with a 25% markup sells for $12,500 — and the margin on that job is 20%, not 25%. The $2,500 profit is 25% of cost but only 20% of price.
The conversion formulas
- Price = cost × (1 + markup)
- Margin = markup ÷ (1 + markup)
- Required markup = target margin ÷ (1 − target margin)
- Example: a 33.3% markup produces a 25% margin. A 100% markup produces a 50% margin.
Why the gap matters
Overhead recovery, owner salary, warranty work, and slow months all come out of margin. If your business needs a 30% margin to be healthy and you price with a 30% markup, you are running a 23% margin business — the missing 7 points come out of the owner's pocket, silently, every job.
This is why Drevanto's Margin Guardian reviews drafts against margin rules: the check happens before the proposal goes out, when it can still change the number.